Chemco eyes debt equity swap, ZSE exit

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AGRO-INDUSTRIAL concern Chemco Holdings is seeking shareholder approval for a debt to equity swap with its parent company, TSL, and a $2,6 million private placement to retire its debt.
Shareholders will on March 13 vote on the capital raising initiatives aimed at retiring the company’s debt at an extraordinary general meeting.
Chemco said its business model, coupled with high overheads and its inability to effectively recapitalize operations, has resulted in losses over the last three years.
Its share price at the Zimbabwe Stock Exchange plunged to $0,005 from a peak of $0,300 before it was suspended.
The company, whose parent company TSL is also listed on the ZSE, said it would delist from the local bourse should shareholders approve of the scheme.
“In order to successfully undertake the corrective actions required, TSL has decided to engage the minority shareholders of Chemco with a view to acquiring all Chemco shares it currently does not own through a share swap under which TSL will exchange one TSL share for every 1,88 Chemco shares with the view to delisting the company’s shares from the ZSE,” read a circular published on Wednesday.
To support its operations over the last three years, Chemco borrowed $2,3 million from financial institutions and its major shareholder.
Of this debt, $1,983,541 is owed to TSL, which was provided to the company in the form of a shareholders loan with an interest rate of eight percent per annum. The remainder of the debt is a $327, 000 bank facility.
“Because of its poor operational and financial performance, the company is unable to pay off these obligations along with $330, 679 worth of third party payables. The board is proposing a transaction that will result in the conversion of the shareholders loan, the bank overdraft and trade payables that are to be assumed by TSL, into ordinary shares to be issued to TSL,” said the company.
Chemco’s proposed debt conversion and private placement would be for up to $2,641,220 worth of debt and trade payables that will be converted into Chemco shares at a price of $0,17 per share, resulting in the issue of 15,536,588 Chemco shares.
TSL delisted Agricor from the local bourse in 2000 and listed Chemco Holdings in its place through an unbundling process which now appears to have failed to unlock desired shareholder value.Advertisement