PTC Board Suspends 8 Signatories of Letter Asking Press Corporation to End PTC Sale

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The People’s Trading Center (PTC) board has suspended all 8 signatories to the letter written by senior management asking Press Corporation Plc to halt the sale of the company, citing that the buyer, Tafika Holdings, had seriously violated the terms of the sales agreement.

When approached, most of the signatories declined to comment, but Flawless Inside sources confirmed that senior executives received their suspension letters on Thursday June 2 – stating the suspension was for 30 days pending investigations .

Our source also reported that Tafika Holdings has yet to pay the K6 billion it was supposed to honor as an equity investor, but the travel and other expenses of the owner, Arson Malola – a Malawian based in South Africa – are funded by PTC.

Investor Arson Malola

The source also says that PTC created a new position (Head of Legal) and brought in Arson Malola’s niece, Sheilla Malola – daughter of Arson’s brother, Lloyd Malola – without any interviews.

After the 8 letter writers, Malola took to social media claiming that the share purchase agreement (SPA) he had with Press Corporation Plc to buy People’s was about to be finalized. concluded, but in their letter, PTC senior management declared the breach of the sale agreement. had an impact on PTC as a company, its employees, its suppliers and Malawi as an economy.

Other sources indicate that People’s does not do business with other suppliers on the line of credit because Tafika apparently owes them money from another business transaction – one of them being Castel, whose case is still before the courts.

In the letter, senior management said they were making the request to Press Corporation “with a heavy heart because we believe we are responsible for PTC’s 615 employees and over 400 suppliers of various goods and services.”

Other sources have revealed that it appears Press Corporation has abandoned the whole process despite the recapitalization of the company, which was agreed that Tafika would pump out K6 billion with PCL pumping out K12.5 billion.

The letter noted that on April 7, 2021, PTC senior management – with input from all of PTC’s management – presented to PTC’s Board of Directors the need for a healthy balance sheet for the company to can achieve recovery.

Management informed the board that in order for PTC to achieve the desired turnaround, it needed a capital injection of approximately US$22 million and that the board had accepted management’s proposals after being informed that the processes were already underway to find an equity investor.

The process, according to the relevant management, was championed by the current interim group CEO when he served as chief operating officer for Press Corporation Plc Group.

After a rigorous process, the CEO successfully identified an equity investor to champion the turnaround process identified as Tafika Holdings Limited and “PTC management and staff were very pleased to note that finally the company will be recapitalized to achieve turnaround if needed and start competing in the Malawian retail space with adequate capital.”

PTC Headquarters

The initial amount required to clean up the balance sheet was $22 million (K18.3 billion) but at the time of closing the deal the amount required was revised to K18.5 billion, the investor offering 6 billion K.

The letter said that Press Corporation was working to inject the shortfall of K12.5 billion by taking on loans and other creditors to ensure that the full injection required for the recovery of the business was completed and allow the new shareholder to take over a business with a healthy balance sheet. .

General management’s understanding of PTC’s buy-sell agreement was that it was designed to clean up the balance sheet, retire all borrowings and creditors effective February 28, 2022, and provide a new lease of life. intended to achieve the initial objective of injecting equity and cleaning up the balance sheet as presented to the Board of Directors on April 7, 2021.

Total liabilities as of February 28, 2022 stood at K18.5 billion – which include loans of K10.9 billion from banks and other financial institutions; K1 billion in rent arrears; K351 million in pension arrears and K6.2 billion in trade and other creditors.

Management says Tafika Holdings has committed to pay the assumed debts of K6 billion within 60 days or reach a settlement agreement with all suppliers within 60 days of signing the agreement – assuming debts which included Pension Fund arrears at K351 million; Malawi Aid Society Medical (MASM) arrears are K31 million; PAYE tax arrears at K180 million and ESCOM arrears at K495 million.

The management concerned indicates that the members of staff were particularly concerned about their pension and MASM arrears which have been assured as well as the suppliers that things will improve by the end of April at the latest by mid-May 2022 when the agreement with investors would be concluded.

But as of May 16, 2022, Tafika Holdings is said to have “failed to honor its commitment to pay insured commitments within 60 days” according to the SPA and it is of particular concern that the company’s financial situation continues to deteriorate and that the creditors continue to increase at the rate of approximately K300 million per month.

“Who will be liable to honor these debts if Tafika Holdings Ltd disappears?” asked the management concerned. “In the three months to May 31, 2022, we already estimate creditor growth of around K1 billion.

“Tafika Holdings has failed to demonstrate to PTC’s external auditors, Deloitte, that it has the financial capacity or has adequate financial facilities or financial resources to honor the purchase consideration of K6 billion.”

In light of this, management advises that Deloitte has advised that PTC is not a going concern and has a draft disclaimer on the financial statements for the year to December 31, 2021, in which the auditors effectively concluded that “Tafika Holdings does not have the financial resources, does not have the financial capability and is unable to raise the KK 6 billion needed to pay PTC’s creditors to enable it to continue to operate as a going concern for the next 12 months from May 2022 to April 2023”.

Tafika Holdings is said to have so far failed to pay ESCOM’s arrears of K495 million, which is part of the K6 billion purchase consideration that prompted ESCOM to issue a disconnection notice. of power at all PTC postpaid sites across the country. May 31, 2022.

Tafika Holdings also allegedly failed to pay K309 million to Rab Processors Limited which it promised to pay within 60 days of taking over the company, leading Rab Processors to file a complaint with the High Court of Malawi to declare PTC insolvent and press for a forced withdrawal. liquidation of the company.

Tafika Holdings also failed to pay the K351 million pension arrears, which is also part of the K6 billion purchase consideration that was also supposed to be paid within 60 days of signing the SPA in February – which also led the senior PCL Pension Find officer to write to PTC management advising them of the seriousness of the matter.

Company staff threatened to urge the Governor of the Reserve Bank, which is the Registrar of Financial Institutions, to take action against PTC regarding pension arrears.

Based on these, management claims that it was forced to agree with the auditors of PTC, Deloitte that Tafika Holdings does not have the financial capacity to increase the purchase consideration by K6 billion and “As such, the fundamental term of this sale has been breached and will not be remedied within a reasonable time.”

Thus the request for termination of the SPA while praying that if it is premature to do so, PCL must agree to honor all debts that accrue to PTC as a result of operating at a loss due to a lack of inventories as on a monthly basis, PTC “accumulates approximately K300 million in liabilities in terms of unpaid rent, staff expenses, unpaid electricity and various unpaid goods and services that cannot be paid for by current gross profits” .

They also state that Tafika Holdings does not have a known physical address in Malawi in terms of office or assets and “as such it cannot be held responsible for such liabilities if it decides to go out of business”.

But Malola responded — not to the petition from PTC senior management — but to her reaction to what’s been circulating on social media, describing it as mere “rumors.” [which] are baseless and without merit”.

It says the source of the story is from a reporter, who cites inside sources and “made no effort to contact the directors of Tafika Holdings Ltd to confirm the status of the transaction.”

He explains that the sale and purchase transaction was signed and finalized in March 2022 but is subject to regular approvals, which contrasts with what senior management says was done in February.

“While Tafika Holdings Limited has taken over the management of the business, the closing of the transaction will take place in the coming weeks,” he wrote, noting that “currently the business is in transaction – of where the low level of stocks.

“However, Tafika Holdings plans to commence and is committed to supplying stores over the next week. The delay was primarily caused by the supply chain constraints currently being experienced in the country and regionally.

“Tafika Holdings is working tirelessly behind the scenes to ensure our customers are served with the right range of products at affordable prices in the future as we put strong internal controls in place.

“As the business transitions, we ask all stakeholders to be patient and forgiving with us over the coming weeks. [as] Tafika Holdings is committed to recapitalizing the business, championing turnaround and implementing growth.

The implementation of growth, according to Malola, “involves, among other things, expanding the number of popular stores to no less than 200 stores over the next five years across Malawi, thereby creating jobs.”

“PTC is one of the largest consumer goods retail stores in Malawi and the leading grocery retailer operating 20 stores in Lilongwe, Blantyre and Zomba with the majority of its stores being in Blantyre.

“It operates under People’s, SPAR and Food Lover’s Markets under license and franchise respectively,” Malola said in its statement.

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