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Air Zimbabwe legacy debts spook investors

by Staff reporter
24 May 2019 at 07:37hrs | Views
GOVERNMENT'S delay in moving on the Air Zimbabwe's US$381 million debt assumption plan continues to weaken the airline's chances of courting new partners, an official has said.

Grant Thornton, the special administrator which now runs the affairs of AirZim, says despite attracting 10 potential investors this year, the company's ballooning debt remains a deterrent to foreign partners.

Assistant administrator Tonderai Mukubvu told businessdigest this week that investors remained wary of injecting capital into a company plagued by legacy debts. The administrator insists that debt assumption would boost the company's turnaround strategy as most investors were demanding a clean balance sheet.

The airline is currently engaging the Ministry of Finance to finalise the debt assumption process but had altered the timelines for the involvement of a new partner.

"We have 10 interested parties that submitted their bids to partner with Air Zimbabwe. One of them had a unique proposition that they had made to Air Zimbabwe," Mukubvu said.

"It's been slow in the sense that there are still some key elements that need to be dealt with and these elements were made very clear to government. One of these areas relates to the debt assumption. So we are dealing with the Ministry of Finance to try and provide a workable solution around the assumption of the debt."

In November last year, AirZim urged interested parties to invest in the stuttering airline before a crunch meeting with creditors who demanded prompt payment.

Of the US$380 million, US$30 million is owed to foreign creditors while US$292 million is government-to-government debt.

"No investor would come to Air Zimbabwe as long as Air Zimbabwe is saddled with a US$380 million debt. All the investors, if they are to come in, they would want at least a clean company. They would want to work with something where whatever fresh capital injected will be directed towards the business growth instead of paying off of debts," Mukubvu said.

Government has in the past been criticised for failing to prioritise AirZim's resuscitation amid reports that former Transport minister Joram Gumbo sabotaged a lucrative US$300 million capital injection into the airline by a Dubai investor in a bid to prop up controversial airline Zimbabwe Airways.

The Dubai company reportedly pursued the deal with former board chairperson Chipo Dyanda for two years which Gumbo reportedly frustrated. The Dubai investor planned on recapitalising the airline, including debt assumption.

The disbandment of the board and subsequent appointment of a caretaker administrator were meant to safeguard the airline's assets which have been under threat from litigious creditors.

Debt reconstruction is meant to facilitate the management of the airline's debt and its subsequent amortisation. It is also meant to preserve the company's assets and establish firm operations.

AirZim, which inherited 18 aircraft in 1980, is left only with two planes, one of which has been grounded since January.

Recently, the airline got a timely boost after receiving an Embraer ERJ145 plane which had previously been earmarked for ZimAirways.

The ZimAirways-branded aircraft touched down at Robert Gabriel Mugabe International Airport amid controversy that governmnt was benefiting from equipment bought under the bogus airline.

The plane, bought under the controversial ZimAirways deal, is expected to start flying next month after undergoing routine service and registration. The aircraft is expected to ease pressure on the wide-bodied Boeing 777 which survived a mid-air scar last month when it caught fire.

"We are still working on the registration process. There are still some outstanding elements but all those are under control," Mukubvu said.

"The aircraft will be registered under Air Zimbabwe and it's unfortunate that we couldn't get the aircraft painted in America due to issues beyond our control but when it does take off it will definitely be in Air Zimbabwe colours."

Transport minister Joel Biggie Matiza said AirZim is entitled to ZimAirways planes. Government is set to deliver two Boeing 777 jets from Malaysia.

Source - the independent