23 May 2017

Zimbabwe: Merlin Cuts It Close As Liquidation Deadline Looms

Textile firm Merlin's judicial manager is still hopeful an investor to rescue the company will be found before the company's June 30 liquidation deadline.

Merlin, one of Zimbabwe's oldest textile firms, was placed under provisional administration in 2011, mirroring the broader malaise afflicting the country's manufacturing sector.

Merlin judicial manager Cecil Madondo, who told creditors in January that the company would be liquidated if it did not find new investors to raise working capital and resume operations by June 30, told The Source he is in talks with some unnamed potential investors.

"We are engaged with a couple of creditable investors. All stakeholders will be advised of any developments regarding the company at the appropriate time in the meantime we will continue to source for funding for the company," Madondo said in emailed responses to The Source.

"We remain determined to find the capital injection required for Merlin and avoid liquidation. Merlin is a strategic project on national importance because being a manufacturing company it provides the link needed between agriculture and manufacturing, plus the potential to earn foreign currency from exportation of its products."

Merlin, established in 1954 and owned by Delma Lupepe, requires US$30 million fresh capital spread over a period of five to 10 years to come back to life.

Lupepe took over Merlin in 2004 through his investment vehicle, Maydeep Investments (Private) Limited, after the troubled textiles giant was discharged from judicial management.

A report presented by Madondo at the January creditors' meeting showed that Merlin required US$2,1 million in the short-term to purchase raw materials and to refurbish plant and machinery to start production.

A further US$4,5 million would be needed for major repairs and maintenance to bring the company back to near full capacity.

The report said the company would require US$23,4 million for a new plant, while US$6,3 million would also be required to discharge the company's liabilities.

Merlin's total assets currently stand at US$2,2 million down from US$3,8 million when the company was placed under judicial management in 2011. Its current liabilities are at US$6,2 million, up from US$4,3 million in 2013.

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