LISTED firms, Econet Wireless Zimbabwe (Econet) and EcoCash Holdings (EcoCash), have secured exchange control approvals from the central bank for their upcoming rights offers to be made in United States dollars.
The two firms, which are listed on the Zimbabwe Stock Exchange, seek to raise US$30,3 million apiece from their existing shareholders.
This came as the companies have been unable to secure foreign currency for the purpose of redeeming their debentures that matured at the end of April 2023 via the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction process.
While the companies do generate foreign currency from their operations, this is being deployed to pay for mobile network and related technology upgrades and expansion.
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.
In separate statements released on Tuesday, the companies said the final Zimdollar (ZWL) price for the shares shall be determined on the date they are allocated foreign currency on the interbank market for the purpose of redeeming the debentures in accordance with the exchange control laws of the country.
“Members are hereby advised that the company has now obtained exchange control approval for the rights offer to be made in United States dollars,” Econet’s statement read.
The companies said members who are designated as resident in the register of members of the company as of September 1, 2023, would have an option to follow their rights in local currency.
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“The final ZWL prices for the shares shall be determined on the date that the company is allocated foreign currency on the interbank market for the purpose of redeeming the debentures in accordance with the exchange control laws of the country,” the companies said.
Upon payment of a deposit in respect of each share, the companies said a subscribing member would be issued and allotted each share to which the deposit relates as not fully paid and subject to a capital call and to their lien over shares issued but not fully paid for in terms of the articles.
They added that the capital call on the balance would be made when the foreign currency has been secured and allocated to them, and the applicable exchange rate shall be the prevailing interbank rate plus a margin of 10%.
"In the event of an exchange rate depreciation, interest shall be payable on
the Zimdollar balance of the subscription price calculated at the average rate at which Steward Bank Limited and Stanbic Bank Zimbabwe Limited would be lending to secured debtors with effect from the date the company is allocated foreign currency on the interbank market.
“The interest shall be deemed to be part of the balance of the subscription price and shall be part of the capital call.
“In the event of an exchange rate appreciation, the shareholder will be refunded with the remaining Zimbabwe dollar without accruing any interest, after allocation of the foreign currency.”
The rights offer will be opened on September 11, 2023 and closed on September 29, 2023. The results are expected to be announced on October 6, 2023.
The debentures stem from a US$128 million capital raise exercise in 2017, about half of which were debentures, as the companies 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 that 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, Econet Wireless Zimbabwe 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 were supposed to mature in April this year.
