THE National Social Security Authority (NSSA) is expected to increase its stake in financial services concern Africa First ReNaissance (Afre Corporation) after a recently held rights offer was undersubscribed.
Report by Bernard Mpofu Chief Business Reporter
According to a notice issued by the company on Friday, the $8,6 million rights offer recorded a subscription rate of 27,1%, indicating the pressing liquidity constraints on the domestic market.
Out of the 162 842 928 shares issued under the rights issue, only 44 105 883 shares were subscribed and applied for by the existing shareholders.
A rights offer is a capital-raising exercise which entails offering existing shareholders of securities to purchase further securities in proportion to their holdings made by means of the issue of renounceable letter or other negotiable documents which may be traded for a period before payment for the securities is due.
In October this year, Afre shareholders approved the rights issue to recapitalise the group’s entities and settle outstanding funds owed to policyholders.
The proceeds of the rights offer, according to the group, will be used to purchase investments that meet liquidity and solvency requirements and settlement of amounts owed to policyholders.
Part of the proceeds, the company said, will recapitalise FMRE Life and Health ($1,5 million); FMRE Property and Casualty Zimbabwe; FMRE Property and Casualty Botswana ($2 million); Tristar Insurance ($1,65 million) and settlement of amounts owed to policyholders ($1,33 million).
The rights offer is expected to cost $550 000.
“In the event that the remaining shareholders in the company, holding 48,7% of the issued shares, do not follow their rights under the proposed rights offer, the underwriter will take up the shares,” read a circular which was published before the rights offer.
The Afre rights issue almost faced an impediment when former executive chairman Patterson Timba threatened to block the capital-raising exercise. Timba, however, did not get enough support when shareholders convened an extraordinary general meeting in October.