Econet Wireless seeks shareholder approval to raise US$30,3 million

Listed telecoms giant Econet Wireless is set to hold an extraordinary general meeting in August to seek shareholder approval to raise US$30,3 million through a rights offer.

The estimated net proceeds from the rights offer will be used to repay the debenture holders.

The extraordinary general meeting is scheduled for 7 August and the results of the rights offer are earmarked to be announced on 15 September this year.

A debenture is a type of debt instrument that is not backed by any collateral but by the creditworthiness and reputation of the issuer and is issued by corporates to raise capital for their projects.

According to the abridged circular to shareholders, the telecoms firm noted that it has received an undertaking from existing shareholders representing 50 percent of the issued shares to follow their rights in full. It has an underwriting agreement with TN Asset Management to subscribe for any shares that have not been subscribed for by existing shareholders.

The undertakings to follow rights and underwriting commitments have guaranteed that US$30,3 million will be raised.

Outlining the importance of the rights offer, Econet highlighted that it does not have adequate resources to meet the debentures’ maturity.

“To avoid defaulting on its debenture obligations that are in hard currency, the company intends to raise foreign currency amounting to US$30 319 771 from its members by way of a rights offer of shares with an option for shareholders to use EWZL debentures as a currency to subscribe,” it said.

“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.”

The telecoms entity said it cannot accept local currency payments as these debenture payments are in hard currency with 90 percent required to be made to external debenture holders.

The underwriting commitment amounts to US$13 million and TN Asset Management has guaranteed settlement of the underwriting commitment by ceding to Econet US$8,8 million that it expects to receive from the Rights Offer upon the redemption of 140,858,151 debentures held by TN Asset Management.

Also, TN Asset Management will cede the cash deposit amounting to US$4,1 million that is held with Steward Bank Limited.