RTG's $4,5m rights issue approved

HARARE - Hospitality concern Rainbow Tourism Group (RTG) shareholders yesterday approved a $4,5 million rights issue.

The capital-raising exercise is part of the group’s efforts to put a cap on burdening shortterm borrowing charges that have been aggravating working capital constraints.

Tendai Madzivanyika, RTG’s chief executive, said the shortterm “expensive” loans had accumulated to $14 million, fanned by penalty interests.

Madzivanyika said after channelling the $4,5 million towards repaying the debts, the remaining $10 million or so will be paid through a loan secured from a local lender under favourable borrowing terms.

“The balance will be written off through accessing less expensive money and reducing the effective interest rate from about 24 percent to approximately 10 percent,” said Madzivanyika after the extraordinary and annual general meeting.

He added that prospects looked brighter for the group, which is positioning itself for significant growth.

“Our biggest opportunities are two-fold. The first one is restructuring our balance sheet, which really has an impact on an on-going basis. Our interest burden reduces by over $1 million because of the retirement of the $4,5 million and the restructuring of the remaining $10 million. Our second-biggest opportunity is to drive revenues up mainly through volumes whilst cutting down on costs such as utilities and using alternative sources of energy such as gas,” said Madzivanyika.

The rights offer involves the issuance of new shares to existing shareholders. National Social Security Authority (Nssa), which controls over 50 percent shareholding in RTG, is the underwriter.

Short-term debts have been an impediment on the hospitality group’s viability and since dollarisation, the group’s total interest cost has increased to well over $5 million.

In presenting RTG’s financial results for the half-year to June, group financial director Paschal Changunda said the delayed servicing of short-term loans negatively affected financial performance.

He said the recapitalisation initiative will be vigorously pursued to settle the short-term borrowings and also fund refurbishments currently underway.

Changunda added that to complement the recapitalisation efforts, the group had sold non-core assets such as Touch the Wild lodges and transport operator Tourism Services and was finalising the disposal of Matetsi Water Lodge, which would see the group realise more than $2,5million. - Business Writer

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