HomeBusinessEconet in $130m rights offer

Econet in $130m rights offer


ECONET Wireless Zimbabwe plans to raise $130 million in capital through a rights offer of ordinary shares and linked debentures in order to facilitate the servicing of obligations to its foreign lenders, according to an abridged circular to shareholders.


In the circular released yesterday, Econet said Econet Global Limited, who hold 30 025 of the local entity’s issued share capital, are the underwriters.

The offer was made to members of Econet proportional to their respective existing shareholdings of 1 082 088 944 ordinary shares plus 263 050 614 class A shares at a subscription price of 5 cents per share on the basis of approximately 82 ordinary shares for every 100 shares already held.

“Each right of share offer shall be linked to a redeemable accrual debenture with a subscription price of 4 665 United States cents as a coupon rate of 5% per annum,” Econet said in the circular, adding an extraordinary general meeting on February 3 to approve the capital raise will be convened.

Econet said the critical shortage of foreign currency in Zimbabwean bank’s overseas nostro accounts and the flow of funds that those banks can export to fund their externally held accounts had diminished materially.

“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 of shares and linked debentures.”

Analysts say an infusion of cash derived from the sale of stock can lead to the company growing its business without having to borrow from traditional sources and, thus, avoid paying the interest required to service debt, which can result in a better bottom line.

“With more cash in the company coffers, additional compensation may be offered to investors, stakeholders, founders and owners, partners, senior management and employees enrolled in stock ownership plans,” a financial expert said.

The Econet rights offer comes after Information, Communication and Technology and Courier Services minister Supa Mandiwanzira claimed the company faced financial challenges, in a spat over data tariff hikes.

Mandiwanzira also accused Econet of being greedy.

In a statement released last week, Mandiwanzira said Econet top management visited his offices, not only once, pleading for him not to approve proposals to decrease tariffs and that they be increased instead because their business was suffering.

The statement went on to say Mandiwanzira was told by the Econet top brass that the business “was on the verge of being called out by European Banks from which they have received loans”.

In emailed responses to NewsDay concerning the data tariff spat, Econet spokesperson, Lovemore Nyatsine said their efforts remained focused on ensuring that they act in the best interests of their customers and shareholders.

The spat may have cost Econet some of its mobile subscribers due to its closest competitor, NetOne, reporting a surge in clients a week after the former increased its tariffs, before reverting to the old ones.

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