Volta Star Textiles cash strapped

Business News of Friday, 21 July 2017

Source: dailguideafrica.com

2017-07-21

Volta Star BullionVolta Star Textiles Company Limited (VSTL) is in grim financial straits

Volta Star Textiles Company Limited (VSTL) is in grim financial straits and needs capital injection of GH¢20 million in order to be viable.

As at May, 2017, the total debt of the company stood at GH¢13.4 million.

Minister for Trade & Industry, Alan Kyerematen, disclosed this in Accra when he appeared in Parliament to answer questions on the company.

Samuel Okudzeto Ablakwa, North Tongu Member of Parliament (MP), questioned the Minister on work carried out on the private participation in Volta Star Textiles Limited at Juapong in the Volta Region.

Mr Kyerematen said the company owes the Electricity Company of Ghana (ECG) a staggering GH?3.8 million, GRA GH¢1.0 million, SSNIT GH¢1.0 million and EDAIF (Now Ghana EXIM Bank) GH¢6,144,771.

It also owes GH¢1.47 million to service providers and staff salary arrears.

Government, the Minister noted, was currently looking for a strategic investor, who will assist with the required capital injection to restructure the company to ensure that it produces at optimum capacity.

The Ministry, in consultation with the Transaction Advisor, PricewaterhouseCoopers (Ghana) Ltd (PWC), has decided to abrogate the contract with the Bullion Group Consortium and re-open the tender process to potential investors.

This is scheduled to commence at the beginning of August, 2017.

Volta Star Textiles produces world-class yarn and grey baft with the main local customer being Tex Styles Ghana Ltd (GTP) and its sister company in La Cote d’ Ivoire.

It has recently started exporting to Cameroon.

The company owns the largest spinning and weaving facility in Ghana with production capacity of 20 million yards per annum.

However, the company currently produces 6 million yards of grey baft per annum, representing 30 percent capacity utilization.

It runs two shifts currently employing 750 workers and has the capacity to employ 1,200 workers running three shifts at full plant capacity utilization.

At its present level of plant utilization, the company is making loses.

Financial position

The company owes so much to State agencies, and government, the sole shareholder, has not been able to adequately provide the company with the required working capital in order to make its operations viable.

Mr Kyerematen said as at May, 2017, the total debt of the Volta Star Textiles Company Limited stood at GH¢13.4 million.

He said the company, in addition, needs a capital injection of GH?20 million to be viable.

Restructuring efforts

The Ministry, on August 20, 2014, appointed PricewaterhouseCoopers (Ghana) Ltd (PWC) as a Transaction Advisor to assist in the restructuring of the company.

PWC completed the first phase of the project, which involved an independent business review of Volta Star Textiles Limited, including a valuation of the company in May 2015.

The second phase of the project involved the disposal of 70 percent shares of Volta Star to a strategic investor with the requisite expertise and resources to restructure the company.

In February 2016, the Ministry requested prospective bidders to submit Technical and Financial proposals. Three companies submitted Technical and Financial proposals in April 2016.

These were Bullion Investment Group, China Yuemei Group and Kingdom Business Venture Capital Limited.

After the evaluation of the bid proposals, Bullion Group Consortium was adjudged the Preferred Bidder mainly on the strong textile partners they presented in their bid and their financial bid.

The company was to pay $13 million for the 70 percent VSTL shares.

Payment

AFND International’s offer was revised downwards to US$9.5 million on account of the capital expenditure commitments of US$12.8m they pledged over a 3-5 year period.

According to the Minister, the Bullion Group Consortium, led by ANFD International, has not made any payment although it has had regular consultations with PWC, the transaction advisor.

Even though it pledged to make payment by May, this year, that is yet to materialize.

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