LISTED telecoms firm Econet Wireless Zimbabwe Limited (EWZL) and its subsidiary EcoCash Holdings yesterday announced a renounceable rights issue to raise US$30,3 million for the redemption of existing debentures.
A debenture is a long-term loan that a corporate or government raises from the public for capital requirements. It is not secured by collateral.
The two companies issued abridged circulars to shareholders informing them about the rights offer.
“The board of directors has resolved to offer to the shareholders of the company, registered as such at the close of business on Friday, 18 August 2023, being the record date, 401 586 371 rights offer shares for subscription at a ratio of 17,122 rights offer shares for every 100 shares already held in United States dollars at a price of US$0,0755 each payable in full United States dollars on acceptance with an option to pay in EWZL debentures at a price of US$0,06252 per share,” EWZL said in a letter to shareholders.
“The combined capital raise from the rights offer will amount to US$30,3 million. The estimated net proceeds from the rights offer will be used to repay the debenture holders.”
EWZL said it had received an undertaking from existing shareholders representing 50% of the issued shares to follow their rights in full.
EcoCash resolved to offer 1 604 220 688 rights offer shares for subscription at a ratio of 61,925 rights offer shares for every 100 shares already held in United States dollars at a price of US$0,0189 each payable in full greenback on acceptance with an option to pay in EWZL debentures at a price of US$0,6252 per each debenture held by the company’s shareholders.
The financial technology outfit said it has received undertakings from existing shareholders representing 57,6% of the issued shares to follow their rights in full.
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TN Asset Management is the underwriter.
Both firms proposed to convene an extraordinary general meeting to be held on August 7, 2023 to seek shareholders’ approval of the rights offer.
The EcoCash debentures stem from a US$128 million capital raise exercise in 2017, about half of which were debentures, as the company sought to mobilise the foreign currency needed to settle external loans.
Between 2012 and 2014, Econet obtained external loans amounting to about US$460 million to finance network expansion and meet obligations from earlier debts, which were due.
The transaction underwriters, Econet Global Limited, served as the guarantors of the foreign debt, which had a value of US$128,19 million.
Creditors, who were meant to be paid from the proceeds of the rights issue and debenture instrument included Ericsson, Industrial Development Corporation of South Africa, African Export-Import Bank and China Development Bank.
At the time of the rights offer in 2020, EWZL offered, on a voluntary basis, early redemption of the capital and accumulated interest on debentures issued in March 2017.
EcoCash revealed in its financials for the year ended February 28, 2022, that only 22% of debenture holders exercised the option for early redemption as the fintech company sought to mitigate against exchange risk for the debentures which matured in April 2023.
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