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Truworths Limited, once a retail giant, is set for a major transformation after being acquired for a symbolic US$1 by a consortium led by Valfin Investments. The deal, part of a corporate rescue plan, will see current shareholders exit while the new investors take over management and inject fresh capital to revive the struggling business.
Valfin Investments, a local clothing manufacturer and distributor, has committed to investing US$2 million into the business. The funds will be used for stocking merchandise and renovating all retail outlets to improve the overall shopping experience. Additionally, the consortium plans to introduce a modern retail management system across all stores to streamline inventory management and enhance point-of-sale operations.
Crowe, the corporate rescue practitioner, disclosed in a circular that several potential investors had expressed interest in acquiring Truworths after its placement under corporate rescue. After a thorough evaluation of financial and strategic factors, Valfin emerged as the preferred investor due to its solid track record and alignment with Truworths’ long-term sustainability.
To stabilize the company’s financial position, First Mutual Microfinance (FMM) will inject at least US$2 million by managing Truworths’ debtors’ book. At the time of entering corporate rescue, the company was technically insolvent, carrying a net liability of US$994,321, with 85% of its sales conducted on credit. The investment will be rolled out over six months, with FMM’s contribution expected to grow in line with business recovery. Creditors and corporate rescue expenses will be settled using operational revenue and assets. Bravette Manufacturing, a Truworths subsidiary, will be leveraged to address liabilities related to senior staff. Meanwhile, obligations to NEC employees and corporate rescue costs will be covered through debentures, which will be liquidated between months seven and twelve of the rescue plan.
Other creditors will also be issued debentures, to be repaid in three equal installments over 24 months, accruing interest at 8% per annum. Additionally, post-commencement creditors until November 30, 2024, will be included in the debenture plan.
As part of the restructuring, Truworths will be delisted from the Zimbabwe Stock Exchange (ZSE). The CPR states that the acquisition aligns with Valfin’s strategic objectives, presenting an opportunity for forward integration within the clothing manufacturing sector. The new investors plan to drive business growth through restructuring, strategic partnerships, brand investment, and retail store revamps to create a modern and attractive shopping environment.
Truworths, along with its subsidiaries Topic Stores and Bravette Manufacturing, officially entered corporate rescue on August 7, 2024. The move was necessitated by persistent liquidity challenges, which hampered stock acquisition and debt management, leading to declining sales and cash flow problems. For 16 months before entering corporate rescue, the company struggled to meet payroll obligations. A shareholder meeting to approve the rescue plan is scheduled for February 25, 2025. If implemented successfully, this plan could mark the beginning of a new era for Truworths, ensuring the brand’s survival and positioning it for long-term growth in Zimbabwe’s competitive retail sector.
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