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Business Reporter
Econet Wireless Zimbabwe and its associate, EcoCash Holdings Limited ,will each issue rights offers next month to expunge legacy debts which fell due in April 2023.
The companies intend to raise US$30,3 million each from shareholders to pay outstanding debentures to be settled next month following an agreement with investors.
The debentures were issued in March 2017 as part of the US$128 million capital raise to pay external creditors. Debentures are medium- to long-term debt instruments used by large companies to borrow money, at a fixed rate of interest.
In an abridged circular to shareholders released yesterday, EcoCash said its board of directors 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, 1 604 220 688 rights offer shares.
This will be for subscription at a ratio of 61,925 rights offer shares for every 100 shares already held at a price of US$0,0189 each payable in full in United States dollars on acceptance with an option to pay in Econet Wireless Zimbabwe Limited debentures at a price of US$0,06252 per each debenture held by the company’s shareholders in terms of the debenture register as at the record date.
“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,” said EcoCash.
Similarly, Econet said in a circular to shareholders it did not have adequate resources to meet the debentures’ maturity and to avoid defaulting on its debenture obligations that are in hard currency, the group is raising the required US$30,3 million from its members by way of a rights offer of shares.
This, it said, has the option for shareholders to use Econet Wireless Zimbabwe debentures as a currency to subscribe.
“The company cannot accept local currency payments as these debenture payments are in hard currency with 90 percent required to be made to external debenture holders.
“If the proposed rights offer is not implemented the company will be faced with the risk of defaulting on its debenture maturity obligations which could trigger the company’s creditors to call on the amounts due to them before maturity as the company will be deemed to have committed an event of default.
“This will also damage the company’s prospects of accessing future loan facilities,” said Econet.
In 2017, Econet issued a total 1 166 906 618 debentures, value circa US$54 million, which would mature after six years at a value of US$72 million including interest on maturity in 2023.
However, of the US$54 million the company issued an early redemption option in which US$14,8 million was redeemed by shareholders in July last year.
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