…As US$600m debt scares suitors
The National Railways of Zimbabwe (NRZ) is scrambling to attract fresh cash for recapitalisation with international financiers this week saying any investment on the national rail company will not be a viable proposition, Business Times can report.
The problem, according to several international financiers who spoke to Business Times this week, is that NRZ is mired in a debt overhang amounting to about US$600m, which any suitor is expected to clear.
Apart from that any potential investor is also expected to splurge more than US$2bn to go towards a complete overhaul of NRZ’s fleet, among other obligations.
NRZ is currently faced with a US$236m lawsuit from the Diaspora Infrastructure Development Group (DIDG) whose tender to recapitalise the rail company was cancelled by the government recently.
“International financial institutions will always be concerned and are very aware of on-goings at the NRZ and a red flag will be raised on any proposition to revive NRZ that lands at their investment committees,” a banker with an international financial institution, who preferred not to be named, told Business Times this week.
He added: “The picture is grim for NRZ at many levels, taking into consideration the latest financial figures released by the company.
“In our professional circles of International banking and finance, most continental and regional banks including Chinese and Russian investors are raising out the DIDG lawsuit as the last nail on the coffin saying NRZ is no longer a viable proposition.”
Another international banker told Business Times: “The view in the market is that the best option for NRZ is to engage and resolve with DIDG and convince the global financial markets that the deal will not suffer any further interference.
“NRZ and DIDG must be encouraged to mend their differences and find an amicable solution as quickly as possible and get NRZ working again otherwise NRZ will have to get billions from government coffers
to turn around the fortunes of the company because as it stands it is not prudent for any international finance institution to (bailout) NRZ in its current legal status.”
Several other analysts highlighted the alleged interference in the day to day operations of NRZ by the Ministry of Transport and Infrastructure Development has also stymied efforts to revive the rail parastatal.
They said this has also deterred potential investors from injecting fresh cash into NRZ.
Transport and Infrastructure Development minister Joel Biggie Matiza could not be reached for comment while NRZ chairman Martin Dinha did not respond to questions sent to him.
Last month, DIDG approached the High Court demanding US$236m from NRZ following the cancellation of its contract.
Government cancelled the DIDG tender saying the company lacked the financial wherewithal to implement the project.
But, DIDG refuted the allegations saying they provided term sheets from over 11 financial institutions totalling to over US$1bn. The amount required to capitalise NRZ amounted to US$400m.
Analysts also said it was strange that Matiza pushed for the cancellation of the deal without having a tangible alternative plan.
DIDG said the termination of the deal was irregularly done, a situation which has increased NRZ’s risk in the eyes of funders.
“This gives credence to the concerns of political risk or interference by politicians in mega deals in Zimbabwe, keeping large investors away from putting money in huge transformative projects across
the whole economy which the country badly needs,” an analyst who requested anonymity told Business Times.
After cancelling the DIDG deal, NRZ, however, has tried to move on by engaging Russia’s Union Wagons in a bid to revive the rail company that requires more than US$2bn to realise a complete turnaround.
Sources have however said that NRZ failed to provide a US$1.5m deposit for 100 wagons valued at US$10m.
The 100 wagons were supposed to have been delivered in January 2020.
But, that had not happened.
In contrast, DIDG delivered 14 locomotives and 200 wagons in February2018.
At its peak, the NRZ employed over 17,000 workers in the late 1980s.
Today, the staff compliment has dwindled to 4,600.
Freight declined to 2.6m tonnes in 2016 from 18m tonnes in 1998.
The intervention of 14 locomotives and 200 wagons supplied by DIDG boosted the volumes moved by over a million tonnes to 3.6m tonnes
in 2018. )~v