OK Zim earmarks 50 percent of capital raise to clear debts

OK Zimbabwe plans to allocate just over 50 percent of the funds raised through a rights issue and property disposals to settle current creditors, thereby reducing the cost of debt and re-establishing a normal trading cycle.

The retail giant is seeking to raise a total of US$30,5 million via the planned rights issue and property disposals.

The company said its current debt cost of US$3,1 million for the year ended March 31, 2025, was unsustainable given the thin profit margins prevalent in the retail sector, according to an internal document seen by this publication.

As of February 2025, OK’s overdue creditors was more than US$30 million, with suppliers alone owed US$24 million.

Other payables, including utilities, services, marketing, cleaning and security, amount to US$5,2 million, while statutory obligations stand at US$880 000.

The primary goals of the capital raise are to partially clear legacy creditor debt, strengthen the company’s working capital, fulfil capital expenditure needs and foster renewed supplier support.

A significant portion of the capital, US$20 million, will be sought via a renounceable rights offer.

Additionally, OK Zimbabwe anticipates generating US$10,5 million in net proceeds from the sale of select immovable assets.

For properties currently occupied by the company, sales will be finalised only if buyers agree to long-term lease-back arrangements with OK.

The company will prioritise properties that offer the highest saleability and value in the current market, and a specific list of properties has been identified for this purpose.

The National Social Security Authority (NSSA), holding a 19 percent stake in OK, has indicated its willingness to acquire OK Gweru and OK Malvern for US$4 million.

This offer is contingent upon satisfactory due diligence and the successful negotiation of a purchase agreement.

OK’s current operational challenges stem from a combination of internal and external factors.

Internally, issues include poor capital allocation, inefficient cash flow management and delayed engagement with creditors, alongside slow adaptation to market trends and suboptimal execution of expansion initiatives, the company said.

Externally, the company has been impacted by an uneven playing field, favouring informal retailers who benefit from more flexible pricing and supply chains outside stringent regulatory frameworks.

In February this year, shareholders initiated an urgent executive restructuring, resulting in the departure of former chief executive Mr Maxen Karombo, chief financial officer Mr Phillimon Mushosho and supply chain director Knox Mupaya through voluntary separation agreements.

To ensure experienced leadership, stability, and to boost supplier confidence, the board temporarily re-appointed Mr Willard Zireva, who previously served as chief executive for over two decades.

Mr Alex Siyavora returned as chief financial officer and Mr Muzvidzwa Chingaira was appointed supply chain director.