Local banks are pushing to restructure about US$6 million Border Timbers Limited (BTL) loans in a desperate bid to recover funds and save the company from total collapse.
In a detailed report presented at the creditors meeting on Wednesday, BTL provisional judiciary manager Peter Bailey said banks had expressed willingness to extend further funds while another creditor, German Development Finance Institution (DFI ),was prepared to extend the loan tenure to 2020 with a favourable interest rate to relieve pressure on the company’s cash flows.
Bailey said major shareholders and DFI are owed a total of US$20 million by the company.
“The banks have been engaged by myself together with the representatives from BTL in negotiations to restructure the funds that they are owed. Negotiations are going on and it is expressed that an agreement may be reached soon,” said Bailey.
About US$2,9 million is required to fund immediate working capital needs for the company, he said.
A representative of FBC, NMBZ and Ecobank at the meeting confirmed that a combined amount of about US$6 million was owed to the banks by the company.
DFI has provided BTL with a loan of US$6,1 million and has successfully negotiated for a restructuring facility. The loan’s tenure has been extended to one bullet payment in 2020 with a reduced interest to LIBOR rate plus 2,5%.
Bailey said negotiations with DFI are being considered to apply for funding that would be utilised to refinance the current local bank facilities and also provide a working capital. Should this be successful, Bailey says BTL would be provided with cheaper longer tenor debt which would greatly relieve pressure on the company’s cash flows, while also providing the much needed additional working capital.
Bailey also noted that major shareholders have expressed willingness to court new investors to raise capital to meet the business’s requirements, adding that contact with potential equity investors has been made with a view to securing equity finance for BTL.
However, this initiative would be extended to other local and international equity investors who may have appetite for the business given that BTL is still operating and maintaining its forests.
BTL, whose provisional judicial management was supposed to end on April 29 2015 from January 21, was extended by the Master of High court to July 1 2015 to give the company enough space to recover.
BTL’s statement of assets and liabilities as at January 31 this year shows a net asset position of US$94,3 million.
The assets comprise primarily of the biological assets disclosed with a value of USD$105,6 million while liabilities comprise mainly of deferred tax of USD$30 million, while trade and other payables amount to about US$14,3 million. The company has reduced its workforce significantly from 30 000 to 1 300 employees, but still owes its employees three months’ salary arrears.
Outside South Africa, BTL is exploring new export markets. BTL has outsourced transporting and harvesting of timber to contractors, utilising contracts that introduce variability to the costs and thereby reducing overall costs and unit costs.
Bailey said he has also considered scaling down the operations at charter mill and running the more profitable Sheba estates.
BTL is a subsidiary of Rift Valley Corporation which operates forestry and sawmilling divisions, with the former having a total of four estates which include Tilbury, Charter in Chimanimani area and Imbeza and Sheba located in Penhalonga north of Mutare.
The company was incorporated in 1979 through the consolidation of Border eastern Forest Estates, Renfee Timbers and Forestry management services ltd has the size of estates to about 48 000 hectares with 23 000 hectares currently planted.