HARARE - Africa Reinsurance Corporation Limited (Afre) is poised to launch a rights issue to raise $8,631 million towards recapitalising the company and buttress itself from the impact of the liquidity crunch.

SheilaLorimer, company secretary said the group’s capital raising initiative was taken after considering the state of the insurance sector and the need for shareholder financial support to reposition the businesses.

“The rights offer is being undertaken to address minimum capital and solvency requirements of Afre’s insurance businesses, namely Tristar Insurance, FMRE Life & Health, FMRE Property & Casualty Zimbabwe, and FMRE Property & Casualty Botswana,” she said in a circular to shareholders.

“The proceeds of the rights offer will be used to purchase investments that meet liquidity and solvency requirements, and settlement of amounts owed to policyholders.”

The group, whose operations recently changed hands, last year announced a possible $15 million rights issue but new management under Douglas Hoto believed the operations were viable and $10 million would be enough to recapitalise the business.

The need to recapitalise Afre’s insurance units was also emphasised by the Insurance and Pension Commission.

Afre was asked to implement a raft of reforms after it emerged that its insurance business was prejudiced by delinquent former executives.

Approximately $8 630 675 is expected to be raised by way of offering approximately 162 842 928 rights offer ordinary shares of nominal value of $0,001 at a price of $0,053 per share to holders of Afre
Corporation shares registered as such by Friday, October 2012 19, on the basis of three (3) new ordinary shares for four (4) ordinary share already held.

Lorimer said in the event that shareholders approve the proposed rights offer at the extra ordinary general meeting and assuming that all shareholders follow their rights, there will be no change in the shareholding structure of the Company.

“The rights offer is three (3) rights offer shares for every four (4) ordinary shares held as at record date. Resultantly, if all the shareholders elect not to follow their rights, their percentage shareholding in the company will be diluted by 42,9 percent. The underwriters will take up shares not subscribed for by the existing shareholders or not renounced in favour of another party to the rights offer,” she said.

Nssa is underwriting the rights issue.

Market watchers however, believe that in the event that shareholders of Afre do not approve the proposed rights offer, the sustainable recovery of the group businesses will be severely constrained.

Sequence of events at Afre Corporation
 
May 2011

Patterson Timba, Afre chairperson, unceremonious exits the company.

A week later, Ariston Holdings chief executive, Rachel Kupara, who was thrust at the helm of Afre Corporation resigned.

Afre is suspended from the Zimbabwe Stock Exchange only to be re-admitted a week later.

June 2011

ReNaissance Merchant Bank (RMB) is placed under curatorship for six months to facilitate investigations and to institute corrective measures following dealings that allegedly exposed the bank to a negative capital of $16 million.

January 2012

The curatorship period is further extended to February 2012.

February 2012

Nssa took over RMB after acquiring an 84 percent interest under a $24 million deal. Under the agreement, NSSA undertook to inject $9,8 million in cash to meet RMB’s prescribed capital requirements as well as converting into equity a $8,5 million debt it was owed by RMB.

Econet Wireless Zimbabwe disposed its 19,7 percent stake in the Afre Corporation Limited.

March 2012

Douglas Hoto takes over as the new group chief executive from Sibusisiwe Ndlovu who stepped down.

October 2012

Afre announces $8,631 million rights offer. - John Kachembere