By Alois Vinga
LISTED clothing retailer, Truworths Zimbabwe has tabled plans to unveil a new stores format in response to market dynamics in a bid to fund through a renounceable rights offer which proposes to raise ZW$2,2 billion additional capital.
In a circular sent out to shareholders Tuesday, Truworths company secretary, Brenda Chibanda proposed a renounceable ordinary shares rights offer of 384 067 512 at a price of ZWL$5.80 per rights offer share in a bid to oil the new plans.
A renounceable right is an offer issued by a corporation to shareholders to purchase more shares of the corporation’s stock, usually at a discount.
This offer usually coincides with the company’s decision to issue a new round of stock, which would dilute the shareholders’ equity in the company.
“The rationale for the transaction is to sustain the viability of the business, raise additional capital, at a sustainable cost in light of the high interest rate environment.
“There are also plans to reduce borrowings, open new format Truworths Chain stores and improve the product assortment,” Chibanda said.
The Renounceable Rights Offer contemplated is subject to approval from Zimbabwe Stock Exchange (ZSE) of the proposed transaction; approval of the Transaction by the Exchange Control department at the Reserve Bank of Zimbabwe (RBZ) for the issuance of shares to non-resident shareholders among other conditions.
“If the Renounceable Rights Offer is not implemented as outlined in this circular, the Company will be unable to effectively sustain its operations and growth.
“The Company will face severe cash flow constraints, high finance costs, and reduced working capital,” she said.
The company has been facing a tough operating environment lately due to massive erosion of local currency disposable incomes.
In the period ending January 8 2023, the group’s current assets closed at ZWL483 million against current liabilities of ZWL 974 million, putting the Company’s going forward concerns at risk.
This means the Company’s current assets cannot service its obligations to debtors as they fall short by 50%.
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