RioZim EGM to go ahead

Securities Commission of Zimbabwe.
The commission had raised the red flag after RioZim issued a circular to shareholders based on unaudited financials ahead of the EGM.
RioZim is seeking shareholders’ approval to raise US$55 million through a US$5 million rights issue, US$10 million private placement and the remaining US$45 million through convertible debentures to GEM Raintree Investments of Mauritius, who are the underwriters. SEC chief executive officer Mr Tafadzwa Chinamo said the commission wanted RioZim to give shareholders enough details on the transaction ahead of the EGM,  which they have since done.
“We do not want to involve ourselves in company transactions but we felt it was prudent for RioZim to deal with these disclosure issues,” he said.
“The decision is up to the shareholders and their decision is based on the information they would have received. That is why we were concerned that appropriate information be circulated.”
RioZim elaborated on all the issues raised by the SEC. But the group said audited financials would be published before Friday. This means that the listed company only has less than three days to do so. However, they said: “RioZim shall endeavour to ensure the audited financial statements are published prior to the EGM. It is not anticipated that there would be any material changes to the unaudited financial statements disclosed in the circular ”.
SECZ had ordered RioZim to give more background on GEM Raintree and disclose the relationship of the three companies involved in the transaction.
SEC has also queried the limited dilution aspect of the transaction, as GEM can easily own 56 percent through converting debt and the private placement.
They said there was also inadequate disclosure on the debenture, saying the convertible debenture on its own would need its own circular than just a term sheet.
RioZim has now indicated that if holders of the debentures elect to effect conversion, existing shareholders would be diluted. If the US$45 million is raised from the issue of convertible debentures and the conversion is at US$1,20, the maximum number of ordinary shares to be issued to holders of the convertible debentures represent 41,29 percent of the company’s share capital. Against this background, it means GEM Raintree could raise its shareholding in the group to 55,96 percent of the shares in issue.
This has raised questions, as the transaction would have exceeded the country’s indigenisation threshold that requires foreign companies to own not more than 51 percent in local operations. On debt retirement, the SEC demanded disclosures on the RioZim debt maturity profile.