THE National Social Security Authority (NSSA) is set to increase its stake in hospitality concern Rainbow Tourism Group (RTG) after it snapped up over 70% of the new ordinary shares issued during its rights offer.
Report by Mernat Mafirakurewa
NSSA, as the underwriter of the $4,5 million rights issue, took up the shares after it was undersubscribed.
Of the 225 million shares that were issued, only 63,2 million, representing 28,10%, were subscribed and applied for.
According to the company’s 2011 annual report, NSSA held a 27,4% stake.
The new share register with the new shareholding structure, according to officials involved in the transaction, is expected by Thursday next week, but indications are that its stake will increase to around 34%. As the liquidity constraints continue to haunt the local market, NSSA has become a source of funding for a number of local companies to recapilatalise their operations.
The authority has shareholding in most banking institutions in the country.
“The directors of RTG are pleased to announce the results of the renounceable rights offer of 225 000 000 rights offer shares at $0,02 each.
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“Under the renounceable rights offer, RTG sought to raise up to $4,5 million from eligible shareholders,” RTG company secretary Stephen Nyabadza said.
Proceeds from the rights offer will be channelled towards the recapitalisation of the hotel group.
In its pre-rights offer circular to shareholders, RTG said in the absence of recapitalisation post-dollarisation of the economy, RTG management had to resort to expensive short-term loans borrowed from local banks to finance critical capital requirements and working capital.
“The proposed recapitalisation through a rights offer of approximately $4,5 million is designed to address the group’s working capital requirements by retiring part of the $12,6 million short-term expensive loans and the balance shall be restructured through a $10 million secured from a local lender under favourable borrowing terms,” reads the circular in part.
“The directors are of the opinion that RTG is now in a constrained position in as far as servicing its debt is concerned.
“However, upon successful implementation of this rights offer, the company shall be in a better position to service its financial obligations as, and when they fall due.”
The recapitalisation is expected to assist in freeing up working capital that was being channelled towards interest payment.
