The Sunday News
Dumisani Sibanda, Sunday News Correspondent
WORKERS at the debt ridden Hwange Colliery Company Limited (HCCL) have defied a call by Mines and Mining Development Minister Walter Chidhakwa to withdraw an application seeking to place the company under judicial management.
In fact the workers, through their lawyer Dumisani Dube of Mathonsi Ncube Law Chambers last Monday resubmitted their application Case Number HC361/16 with the Bulawayo High Court which now includes the Assistant Master of the High Court as the second respondent.
According to the application, the workers have instructed that if Hwange is opposed to the latest application it must file opposing papers within five days.
A few weeks ago, Minister Chidhakwa visited Hwange and pleaded with the workers to withdraw an earlier application they had filed seeking the company to be placed under the same arrangement.
This was after Minister Chidhakwa had instructed management to cut salaries by half and turn around the fortunes of the company in three months.
HCCL is sitting on a $160 million debt and its production levels are nose diving.
But in the resubmitted application, the workers even suggested that the coal miner must be delisted from all the three stock exchanges it is listed.
Hwange Colliery is primarily listed on the Zimbabwe Stock Exchange and also listed on the Johannesburg Stock Exchange and the London Stock Exchange.
In the court papers, the workers submitted they wanted judicial management of the company as they realised Hwange was now sliding towards bankruptcy and workers were now under threat in those circumstances.
They alleged management was making decisions detrimental to the workers and suspected that it wanted to “siphon money” from the ailing coal mining company.
In their court application the workers want the court to appoint Phillip Ndlovu of Phillip Ndlovu and Associates Chartered Accountants the judicial manager and Dumisani Sibanda, a chartered public accountant.
They also want the court to stop all court actions and proceedings and execution of all writs, summonses and other court proceedings against the company, its shareholders, directors and guarantors.
As part of the application, a turn-around strategy for HCCL, crafted by the proposed business rescue consultant, Mr Sibanda, under the envisaged judicial management situation as suggested among other crucial issues the coal mining firm delists from the Zimbabwe Stock Exchange, Johannesburg Stock Exchange and the London bourse to enable it to court an investor to assist in reviving the mining concern.
The strategy document points out that HCCL has been subjected to bad publicity and this coupled with Zimbabwe’s illiquid economic situation makes it almost impossible to raise money through a rights issue as would ordinarily be expected.
It says under normal circumstances, a rights issue would be used to raise capital leveraging on the reputation of the company, future dividends, share price appreciation, mine reserves and general conducive market conditions.
“There is a strong view that given the obtaining circumstances the company’s shareholders will not follow their rights even if Government converts its debt to equity,” reads the strategy document attached to the application.
“The expression below to de-list the company is premised on this handicap. Delisting the company will enable the company to raise capital through other means such as private placement, courting a strategic partner or creating a new class of shares. The removal of the company from the stock exchange will lessen the costly demands of the stock exchange and will allow for flexibility to court potential investors. A suitable bank will be approached to partner with the company to court potential investors.”
The document reads that the company’s shares have been trading at three United States cents, with 182 199 850 issued shares meaning that the market capitalisation of the company was US$5, 465 million.
“This is a distorted value of the company. The intrinsic value of the company can be determined realistically outside the stock market as the company’s shares have been distorted by market perceptions which need to be improved, the demand of its shares and other market forces that influence the pricing of shares in an open market.
“The nominal value of shares is US$45 million compared to its market value of US$5,465 million,” reads the document.
In the document it is noted that there was a need to make the company’s balance sheet “fundable and (able to) attract financing”.
It is observed the company’s balance sheet is laden with debts and therefore needs to be restructured through converting debts into equity “as far as possible”.
“This is mainly so in respect of large institutional creditors such as National Social Security Authority and the Mining Industry Pension Fund and government,” reads part of the document.
“Government has already agreed to convert the Zimbabwe Revenue Authority debts into equity. Management has, however, not produced a prospectus two years after the idea to restructure the balance was recommended. This should be expedited by appointing a more competent financial advisor with capacity to handle the level of the assignment.”
