RTG shareholders approve $22,5m capital raise

RAINBOW Tourism Group (RTG) shareholders on Tuesday gave the nod to resolutions that seek to raise $22,5 million through a rights offer of ordinary shares and linked debentures to settle its debt and raise working capital.

BY FIDELITY MHLANGA

The capital injection of $22,5m will ensure the company is able to restructure its debts through $16,6m in the form of debentures. The equity injection through the rights offer is to ensure that the company’s overall liabilities will be reduced to $5,8m.

According to a circular to shareholders, RTG requires approximately $16,4m to settle loans with the National Social Security Authority (NSSA).
The circular to shareholders said the directors sought shareholder approval to authorise the issuance of
625 000 000 ordinary shares at a subscription price of 0,93 cents on the basis of one ordinary shares for every 2 9929 shares already held to such shareholders .

In addition, the directors sought authority to issue and allot

1 794 354 839 debentures at a price of 0,93 cents, with a coupon rate of 6% per annum payable bi-annually for a term of seven years.

The extraordinary general meeting (EGM) also sought approval for each debenture to be linked to each rights offer at the time of subscription, but should be delinked upon issuing and allotment to enable the debentures and shares to be tradable independent of each other. The meeting sought the directors’ authority to use the entire rights offer and debenture offer proceeds to pay off the costs of the transaction and the company’s debts.

After the passing of the resolution, RTG chief executive, Tendai Madziwanyika said the capital raised would enable the company to have a better rating on the market.

“We are very excited about it because the fact that shareholders have resolved to essentially restructure the balance sheet of the organisation, which has put closure to a lot of these old debts and a lot of them emanating from the pre-dollarisation era. So we struggled over the years to pay as much as we could,” he said.

“Earlier on, we said the debt was about $42m after this restructuring, the debt is now at $22m, which is much better. It leaves our gearing at about 35% and that is very important going to the future. It allows us to have a better rating and be able to exploit opportunities that are available in the market.”

Prior to the passing of the resolution, Madziwanyika had a torrid time trying to convince shareholders, who felt they were not getting value for their investment.

“When are we likely to get the dividend because the company has been recording losses for some time now?” one shareholder, Francis Manhanhanha asked.

Another shareholder, who declined to be named, said: “I am wondering what is happening with the board. Does buying these shares makes sense? I have been here since 2012 and I have been hearing the same story.”

The company failed to settle its loans and NSSA has since been granted a judgment in its favour against RTG by the High Court. Failure to settle the loans may result in the company losing some of its properties.

The resolutions were passed after 65,3% of the shareholders voted for the resolution at EGM.

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