Mashudu Netsianda/Natasha Chamba, Business Reporters
BULAWAYO textile manufacturing firm, National Blankets (Pvt) Limited, has been liquidated following years of poor performance and failure to find a good investment suitor in yet another blow to the city’s industrial revival drive.
Bulawayo High Court Judge Justice Nokuthula Moyo issued an interim order directing National Blankets to be placed under liquidation after she was satisfied that the company could not continue operating normally due to serious financial constraints it is facing.
“It is ordered that the applicant National Blankets (Pvt) Limited is provisionally wound up, pending the grant of an order referred to or the discharge of this order. Subject to subsection 27 (1) of the Companies Act, Phillip Ndlovu of PNA Chartered Accountants is appointed provisional liquidator,” ruled the judge.
Justice Moyo ordered any interested parties to appear before the court sitting tomorrow (Thursday) to prove why the granting of a final order to place the company under full liquidation should not proceed.
The company’s products have been experiencing a drastic fall in demand as the market for woven blankets declined. The liquidator is expecting to facilitate the purchase of the company by a potential investor or the disposal of assets.
In papers before the court, National Blankets said it resolved to seek an equity investor, Triumphant Enterprises, to partner as a potential investor.
After an agreement was reached, Triumphant Enterprises purchased modern machinery from Europe, providing access to foreign currency with which to acquire raw materials.
“Following the acquisition of new machinery and access to foreign currency, production improved with capacity utilisation rising from about seven percent to 65 percent,” read court papers.
However, the company later faced challenges associated with loan repayments, prohibitive borrowing costs, labour costs and the general decline in market due to competition from foreign products.
The company said a loan of US$1,2 million, which was long term, was recalled with the result that capital, which would have been available to retool and purchase raw materials, was used to retire the loan, depleting working capital.
National Blankets said the slow uptake of its products also resulted in the company failing to service loans advanced to it by financial institutions and the major shareholder, Triumphant Enterprises.
“The company’s business has failed and it is insolvent with its liabilities exceeding its assets by an appreciable margin such that it would be reckless not to contain the downward slide,” said the company.
During its peak, National Blankets was arguably a market leader in the blanket manufacturing business enjoying a 70 percent domestic market share.
The company was also a major exporter of textile products to the Sadc region. The company, among the second city’s most iconic and oldest, still uses equipment that was first installed in 1940, early into the Second World War and can only manufacture woven blankets.
National Blankets appeared to be on its way out of the woods when in 2014, creditors agreed that all debt be converted to equity at a rate of $0,50 per ordinary share.
The creditors, however, were not keen on putting new money into the company, which had a history of borrowing heavily. National Blankets has been under judicial management since 2012 due to viability concerns.
It received a $500 000 loan facility from the Central African Building Society (CABS) under the Distressed and Marginalised Areas Fund (Dimaf) in 2013 but the money failed to change its fortunes.
Also in 2013, the firm sold off some of its property to pension fund, the National Social Security Authority (NSSA) and settled its debt to the bank and service providers such as Bulawayo City Council, paying a combined total of $2.6 million.