After shareholders of Pula Steel failed to inject fresh funds into the company, the provisional liquidator of BCL has filed for the steel-making company to be put under provisional liquidator.
BCL, which is the majority shareholder in Pula Steel, is also the biggest creditor of the steel making company, which is currently under judicial management.
Provisional liquidator of BCL, Nigel Dixon Warren told BusinessWeek that following shareholders’ failure to inject fresh funds into the company he was left with no option but to apply to the High Court for the company to be put under liquidation.
“There is no money to operate the company. So the best thing is to put it in liquidation so that the liquidator can try and find a new buyer,” he said. Dixon-Warren’s move comes at a time when founding shareholders of Pula Steel, the Verma Family, have asked the High Court to relieve the company’s judicial manager, Vijay Kalyanaraman of Grant Thornton of his duties saying he has contributed to the current unfeasible state of the company and has failed to take the necessary steps to ensure its rehabilitation.
Pula Steel, which was placed under judicial management in February this year after falling into troubles, is currently owned by BCL (67%), Verma Family (22%) with the remainder held by the Citizen Entrepreneurial Development Agency (CEDA) as well as a company called Wealth Generations. Last month, creditors of Pula Steel, who are owed P100 million, gave the judicial manager the green-light to seek a P28 million injection from shareholders for the resuscitation of
But the Verma Family, who found the Selebi-Phikwe based steel manufacturing company in 2012, have declined to inject any fresh capital into the company saying they have not been furnished with the proposed turnaround projections by the judicial manager. On the other hand, CEDA is also understood to have placed “obstructive ” conditions before they can inject any fresh capital into the company, a situation that has created friction amongst the shareholders.
Although BCL is currently the biggest shareholder, it also the biggest creditor owed about P58 million from a guarantee the mining company had granted on a Pula Steel loan from a local bank.
CEDA is the second largest creditor with the agency owed P15 million in shareholder loans, Botswana Power Corporation (P10 million), scrap metals suppliers (P7 million), employees (P3 million) while an Indian company that provided expatriate workers to Pula Steel is owed P6 million. All employees were retrenched March this year when the company went under judicial management.
Pula Steel was the first company in the country to process scrap metal into intermediate products called billets and was a milestone under BCL’s corporate strategy Polaris II that hoped to expand the Mine’s portfolio to develop an iron production circuit.
The company was setup at an initial cost of P130 million before an additional P53 million was injected into the firm by BCL.