As of May 2017, the total debt of the company stood at GH¢13.4m.
The Minister of Trade and Industry, Mr Alan Kyerematen, disclosed this in Accra when he appeared on the floor of Parliament to answer questions posed by the Member of Parliament (MP) for North Tongu, Mr Samuel Okudzeto Ablakwa.
The North Tongu MP had sought to find out from the minister the progress of ongoing involvement of private participation in the VSTL situated at Juapong in the Volta Region.
According to Mr Kyerematen, the government was at present looking for a strategic investor who would assist with the required capital injection for a restructuring of the company to enable it to produce at optimum capacity.
He said the ministry, in consultation with the Transaction Advisor, PricewaterhouseCoopers (PwC) (Ghana) Ltd, had taken the decision to abrogate the contract with the Bullion Group Consortium and reopen the tender process to potential investors.
The tender process is scheduled to commence at the beginning of August 2017.
About Volta Star Textiles Limited
Mr Kyerematen said the company produced world-class yarn and grey baft and had Tex Styles Ghana Ltd (GTP) and its sister company in Cote d’Ivoire as its principal customers.
He said the company had recently began exporting to Cameroun.
He revealed also that the company had the largest spinning and weaving capacity in Ghana with an estimated grey baft production capacity of 20 million yards per annum.
VSTL, he said, currently produces six million yards of grey baft per annum, representing 30 per cent of its capacity utilisation.
He said the company which currently runs two working shifts and employs 750 workers had the potential to employ 1,200 workers at full plant capacity utilisation and run three working shifts.
“At its present level of plant utilisation, the company is making losses,” he said.
Current financial position
Mr Kyerematen told the House that the company was heavily indebted to state agencies because its sole shareholder, the government, was not able to adequately provide it with the required working capital to make it viable.
He gave a breakdown of the debts as follows: Electricity Company of Ghana (ECG), GH¢3.8 million; Ghana Revenue Authority, GH¢1.0m; Social Security and National Insurance Trust, GH¢1.0m and EDAIF (now Ghana Exim Bank), GH¢6,144,771.
He said the company also owed service providers and staff salary arrears to the tune of GH¢1.47m.
Mr Kyerematen said with the current poor state of affairs, the Ministry of Trade and Industry appointed PwC as a Transaction Advisor on August 20, 2014 to assist in restructuring the company.
He indicated that PwC completed its first phase of work which involved carrying out an independent business review of VSTL and followed it up in May 2015 with a valuation of the company.
Mr Kyerematen said the second phase of the Transaction Advisor’s work necessitated disposing of 70 per cent of the shares of VSTL to a strategic investor with the requisite expertise and resources to restructure the company.
He noted that the situation became inevitable due to the dire straits that VSTL was in, such that proceeding with the status quo would have been detrimental to the nation in general and the Juapong community in particular.
In February 2016, he said, the ministry requested prospective bidders to submit technical and financial proposals to it, and three companies submitted same in April 2016. The companies were Bullion Investment Group, China Yuemei Group and Kingdom Business Venture Capital Limited.
After evaluating the bid proposals, Bullion Investment Group was adjudged the preferred bidder based on the strong textile syndication and finances it presented.
The company, he stated, was to pay $ 13 million for the 70 per cent VSTL shares.
Mr Kyerematen said an agreement was reached with the Bullion Investment Group Consortium led by ANFD International, a member of the Bullion Investment Group which assumed the prime role in Bullion Investment Group Consortium’s arrangement.
He said ANFD International’s offer was revised downwards to $9.5m on account of the capital expenditure commitments of $12.8m they pledged over a three to five-year period.
“The Bullion Investment Group Consortium, led by ANFD International, is yet to make any form of payment although they have had regular consultative engagements with the Transaction Advisor,” he said.
Mr Kyerematen further mentioned that ANFD International proposed to make payment by May 2017 but had failed to make any payment to date.