Rainbow Tourism Group (RTG) could soon lose some of its properties, including Bulawayo Rainbow Hotel following the company’s failure to settle a $16.4 million loan from the National Social Security Authority (NSSA).
RTG Group Chief Executive Officer, Tendai Madziwanyika, said the principal NSSA loans fell due on the 31st of December 2015 and 2016 with the High Court having already ruled in favor of social security authority.
“The principal NSSA loans of $10 million and $3.6 million fell due on the 31st of December 2015 and 31st of December 2016 respectively.
“The company could not settle the loans and NSSA has since been granted judgment in its favor against the company by the High Court of Zimbabwe.
“One of the company’s properties which was used as security against the US$10 million loan has been declared specially executable to satisfy the judgment,” said Madziwanyika.
He added that failure to settle the loans may result in the company losing some of its properties including Bulawayo Rainbow hotel.
“Failure to settle the loans may result in the company losing some of its properties, the proposed debenture issue will therefore be partly applied towards settlement of the loans from NSSA. The capital injection of US$22.5 million will ensure that the company will be able to restructure its debts through the US$16 687 500 in form of debentures.
“The equity injection through the Rights offer will also ensure that the overall liabilities of the company will be reduced to the extent of US$5 812 500 Rights Offer proceeds.
“The transaction will result in a reduction of the working capital gap which stood at approximately US$26 million as at 30th of June 2017.
“The working capital gap includes the loans from NSSA which are now classified as current liabilities and the statutory obligations which are over due,” he said.
He added that the situation is likely to result in prejudice to the company and in the event that the forced sale value does not cover the entire debt,all other assets of the company will also be liable to execution to satisfy the remaining portion of the judgement debt.
“There is a high risk that in the event that the capital raising initiatives are are not successful ,NSSA may proceed to execute its High Court judgement resulting in Bulawayo Rainbow hotel being disposed off at auction at a forced sale price value.
“This is likely to result in prejudice to the company and in the event that the forced sale value does not cover the entire debt,all other assets of the company will also be liable to execution to satisfy the remaining portion of the judgement debt,” said Madziwanyika.
