Khayah Cement to Hold First Creditor Meeting Amid Corporate Rescue Proceedings

Zimbabwe’s leading cement producer, Khayah Cement Limited, currently undergoing voluntary corporate rescue, has scheduled its first meeting with creditors for February 19.

The meeting will allow creditors to submit affidavits proving their claims against the company while also providing an update on the corporate rescue process.

The session will include a statement from the Master of the High Court on the company’s recovery prospects and facilitate the appointment of a creditors’ committee to oversee proceedings.

Corporate rescue, as outlined in the Insolvency Act, involves the temporary supervision of a financially distressed company, placing a moratorium on creditor claims while developing a plan to restructure operations.

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The goal is to ensure business continuity or, if that is unfeasible, to secure a better outcome for creditors than immediate liquidation. Unlike involuntary liquidation, which is initiated by creditors, voluntary corporate rescue is undertaken by a company’s board when they believe the business can be revived.

Khayah Cement, formerly known as Lafarge, initiated the corporate rescue process due to difficulties in meeting financial obligations. The company cited unexpected major equipment failures in its vertical cement mill and kiln, leading to substantial production losses and costly repairs.

The kiln, a crucial component for producing cost-effective clinker—the primary raw material in cement production—was mothballed in 2023, forcing the company to shift to a grinding station model. This change required importing more expensive clinker, increasing production costs and straining financial resources.

Further challenges arose when trade restrictions were imposed on a member of the consortium that acquired a controlling stake in the company. These restrictions led to the withdrawal of key financial and supplier support, making procurement significantly more expensive.

As a result, mounting debts triggered legal action from some creditors, forcing the company into burdensome payment arrangements to protect its assets and reputation. The strain on working capital has hindered recovery efforts and impacted profitability.

The upcoming creditor meeting is expected to clarify the company’s financial standing and potential recovery strategies, marking a critical step in Khayah Cement’s restructuring efforts.