Truworths shareholders inject US$1 million fresh capital

Truworths Limited’s new shareholders, the Valfin-led consortium, have injected US$759 000 into the business since taking over the business on December 1, 2024, immediately placing focus on restocking over the next three months.

On Tuesday, the group’s shareholders and creditors approved the corporate rescue plan (CPR) for the troubled retailer, which will see the new investors inject more than US$4 million to reboot the business.

Mr Oliver Mtasa, the corporate rescue practitioner from Crowe Advisory, in a presentation at a shareholders and creditors meeting, said the business restocking process was progressing well, driven by Valfin and Bravette factories.

“Currently, the stores are over 60 percent stocked, and we expect to reach optimal levels as winter stock continues to arrive,” he said.

Mr Mtasa said of the injected capital, US$400 000 was spent on stock and fabric, and US$250 000 on Valfin factory integration into Truworths.

The IT system got US$45 000, rentals US$37 000 and wages US$27 000.

According to Mr Mtasa, operations have been streamlined to align with the new business model, and the focus remains on maintaining efficiency and improving productivity across all business units.

He said in terms of the new model, Truworths would be a high-end store catering to a niche market.

“The ladies and men’s departments have been merged, and currently, there are 5 Truworths stores operating nationwide,” said Mr Mtasa.

He added that Topics, with 8 stores across the country, will focus on serving the middle-income market.

“Number 1 is positioned to cater to the lower-end market and currently operates a single store in Chitungwiza, with significant growth potential in this low-cost market,” he said.

Mr Mtasa said when the new investor took over in December last year, it retained over 80 percent of the Truworths staff.

He said excess staff were released, leaving the current headcount at 146 employees distributed as 67 at Truworths, 43 at Bravette, and 36 at Valfin.

Mr Mtasa said a funding arrangement with First Mutual Microfinance had been agreed upon.

Valfin is a player in the clothing manufacturing industry, and since opening its business in 2012, the company has experienced consistent growth and success.

According to an earlier circular, a minimum of US$2 million will be injected into the business by First Mutual Microfinance (FMM) by way of taking over and managing the debtors book.

At the time of placing under corporate rescue, the group was technically insolvent, with the initial statement of affairs indicating a net liability position of US$994,321 at a time when 85 percent of the group’s sales are on credit.

According to the CPR, the consortium capital injection will be done over a period of 6 months, whilst FMM will grow in line with the growth of the business.

The creditors and CRP expenses will be paid from the operations and assets of the business, and Bravette Manufacturing (Private) Limited, a subsidiary of Truworths, will be utilised to settle supervisory employee liabilities such as those of managerial and executive staff.

“The liabilities portion relating to NEC employees, together with corporate rescue expenses, will be floated as a debenture being paid or liquidated between months 7 and 12 from the date of Corporate Rescue Plan adoption.

“All other creditors will be issued debentures, which will be liquidated in three equal instalments, being months 12, 18, and 24,” reads part of the circular.

The circular highlighted that post-commencement creditors to 30 November 2024 shall be included in debentures, and the debentures shall accrue interest at 8 percent per annum.

Above all, Truworths will be delisted from the Zimbabwe Stock Exchange (ZSE). According to the CPR, Truworths offers a unique opportunity that aligns closely with Valfin’s strategic growth objectives.

Truworths corporate rescue was effective 7 August 2024, together with its subsidiaries, namely Topic Stores and Bravette Manufacturing Company.

In a corporate rescue notice last year, Crowe said during the corporate rescue proceedings as provided by Section 126 of the Act, no legal proceeding, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any form without the authority of the corporate rescue practitioner.

The first meeting of creditors and members of the company was held on August 28, 2024.

Truworths had been struggling to fund the stock and the debtor’s book, resulting in suboptimal sales, which negatively impacted cash flows, and ultimately the business could not meet the cash flow performance.

Among other things, the group had been failing to fully cover its payroll obligations for the 16 months prior to corporate rescue.

-herald