Afre US$8m rights offer in jeopardy

shareholders want the commission to recommend that the National Social Security Authority abstain from voting because of a conflict of interest.
The shareholders argue that NSSA, as the underwriter, is aware of various legal suits pending in the courts challenging its majority shareholder status.
The NSSA-led board in Afre has sought a rights issue through the EGM set for October 26.
Afre has already published a notice in the Press, inviting its members to the meeting, which also sought to remove three directors — Mr Patterson Timba, Dr Daud Athanasius Dube and Professor Norman Nyazema — from the board of directors.
It is seeking shareholders’ support in allotting new shares to subscribers in a bid to raise US$8 million.
According to the notice, the shareholders will be asked to pass, with or without modification, the resolution that seeks to authorise the directors of the company “to offer renounceable rights offer shares in the ration of three new ordinary shares for every four ordinary shares held by shareholders in Africa First ReNaissance Corporation Limited at the close of business on 26 October 2012”. The shares amount to approximately 162 842 928 ordinary shares of US$0,001 each in the company’s authorised share capital.
They are to be offered to existing shareholders for subscription pro rata to their existing shareholding at a price of US$0,053 per share payable in full on acceptance.
The meeting also seeks to have the balance of the authorised but unissued shares of the company “be placed under the control of the directors for an indefinite period, to be issued in compliance with the terms of the company’s Memorandum and Articles of Association”.
Through their lawyers, Muza and Nyapadi, RFHL shareholders wrote to the Securities Commission of Zimbabwe a day after publication of the notice seeking the commission’s intervention on the matter.
“RFHL is a shareholder of Capital Bank Corporation Limited and this bank owns 31,57 percent of the issued share capital of Afre Corporation,” read part of the letter signed by their lawyer Mr Vote Muza.
“Our client notes with serious concern the fact that the circular to shareholders does not contain sufficient information as to allow shareholders to make informed decisions.”
The RFHL shareholders argued that in making a determinatin that Afre Corporation should make an equity call to its shareholders, the board should have looked at a number of alternatives before “discounting same in favour of the rights offer”.
“These alternatives have not been disclosed,” says RFHL. “We are not sure in the circumstances whether Afre Corporation board considered an internal re-organisation, especially given the Afre Corporation Group’s composite structure, as a way of raising the required amount.”   
RFHL says it fears that the minority shareholders that have suffered from the liquidity crunch are unlikely to be able to buy sufficient equity.
This, the shareholders fear, will leave NSSA with a chance to take all equity sought to be allotted.
“NSSA’s massive conflict has been concealed. NSSA controls Capital Bank Corporation Limited and the minorities therein have not been informed of this proposed rights offer.”
The letter was also copied to Afre chairman Mr Innocent Chagonda, his deputy Mr Misheck Manyumwa and company secretary Ms Sheila Lorimer.
The Afre Corporation circular to shareholders, RFHL argued, did not carry any statement showing the Capital Bank’s commitment to follow its rights.
The RFHL shareholders view the rights issue as self-serving to NSSA, and not for the interest of Afre.
NSSA controls Afre after acquiring the controlling stake on the back of ReNaissance Merchant Bank’s woes.