AFRASIA Kingdom Zimbabwe Limited (AKZL) is planning to raise $50 million through a rights issue as the group seeks to boost underwriting capacity of its flagship banking unit, sources close to the developments have said.
REPORT BY BERNARD MPOFU ,ACTING BUSINESS EDITOR
A rights issue is an offer to existing holders of securities to subscribe for or purchase further securities in proportion to their holdings made by means of the issue of a renounceable letter or other negotiable documents which may be traded for a period before payment of the securities is due.
Responding to questions sent by this paper, the group said: “As you might be aware, AKZL has previously confirmed that as part of its normal business review, it was actively pursuing initiatives to strengthen its business.
“A rights issue is one of such initiatives that have been considered among other options. These are actively underway. The overall objective is to position the group to meet regulatory requirements and also take advantage of business opportunities in the financial services sector. The group expects to make further appropriate announcements soon.”
Sources, however, said the financial services group had already approached the Ministry of Indigenisation and Empowerment amid expectations that local shareholders might fail to follow their rights due to liquidity constraints on the domestic market, resulting in a foreign-based underwriter snapping a huge stake of the group.
Under the country’s indigenisation and empowerment law, foreign-owned companies should sell controlling stakes to locals.
“The bank has already approached the Reserve Bank and the Ministry of Indigenisation over this rights issue. Everyone seems to be cognisant of the fact that raising such an amount of money may be a tall order for local investors. But the group is in need of fresh capital. Once this capital-raising initiative succeeds, the bank should be able to fly with the eagles,” said one of the sources.
“While the level of dilution cannot be speculated at this stage, this initiative is likely going to result in increased foreign investor participation in the bank.”
The sources said the group’s banking unit, Kingdom Bank, which has in the last few weeks been struggling to dispense cash at its automated teller machines, plans to meet the revised minimum capital requirements set by the central bank last August. The minimum capital requirement for commercial banks was raised to $100 million from $12,5 million.
In 2011, Mauritius-based AfriAsia acquired a 35% stake in a $9,5 million deal to shore up the financial services group, which was facing serious viability problems after a messy demerger from conglomerate Meikles Limited.
Following the acquisition, AKZL appointed James Benoit, Kamben Padayachy, Jill Rickard and Brian Fredrick as non-executive directors.
In February, the group’s brokerage unit, Kingdom Stockbrokers, once its flagship, wound up its operations as part of the group’s restructuring exercise.