Econet in bid to raise $130m

HARARE - Zimbabwe's leading mobile telecommunications company, Econet  Wireless, is seeking to raise $130 million, through a rights issue, as a way of servicing its loans.

Econet yesterday said the move was necessitated by the current liquidity and cash crises, which have resulted in local firms failing to settle their international obligations due to foreign currency shortages.

“In recent months it has become clear that there is a critical shortage of foreign currency in the overseas nostro accounts in Zimbabwe’s banks, and that the flow of local United States dollars cash that those banks can export to fund their nostro accounts had diminished materially,” the listed firm said.

“This has made it extremely difficult for the company and its subsidiaries to service their financial obligations to lenders and creditors outside Zimbabwe. To avoid defaulting on its loan obligations, the company intends to raise foreign currency from its members by way of a rights offer to shares and linked debentures,” Econet added in a circular to shareholders.

According to the circular, each debenture shall be linked to a rights offer on a ratio of 1:1.

The move, which will see 1 082 088 944 ordinary shares plus 263 050 614 Class A shares being sold at a subscription price of five cents per share on the basis of circa 82 ordinary shares for every 100 shares already held, is however, subject to shareholder approval

According to the diversified conglomerate, each rights offer shares shall be linked to a redeemable accrual debenture with a subscription price of 4 665 cents at a coupon rate of five percent per annum.

The amount due on both the shares and the linked debentures shall be payable in full on acceptance of the offer, with each class of shareholders entitled to follow their rights and contribute the capital required pro-rata to their existing shareholding in Econet.

This comes as Econet chairman James Myers, last year said depletion of the country’s foreign currency reserves had seen the group engaging lenders to explore the situation in a mutually beneficial manner.

“The depletion of the country’s foreign currency reserves, evidenced by a recurrent balance of payments deficit, has made it difficult for all companies to make payments to foreign suppliers of capital, goods and services.

“As a result, we have been unable to make certain debt repayments on time, notwithstanding that cash was available in our local bank accounts. This situation is expected to persist. We have engaged our lenders and continue to explore mutually acceptable solutions,” Myers said.

Despite this, the group closed the half year in a robust cash position, with $143 million in the bank.

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