LISTED hotelier, Rainbow Tourism Group (RTG) says it will soon redeem in full the debentures issued during its capital raise exercise two years ago.
BY FIDELITY MHLANGA
In January 2018, RTG raised $22,5 million by way of a rights issue linked to debentures. The capital raise comprised $5,81 million worth of rights issue shares and $16,68 million in linked redeemable debentures carrying a par value of $1 each.
The rights issue shares and debentures have since been delinked and both were listed and are trading on the Zimbabwe Stock Exchange (ZSE).
“The board of directors of the company hereby advises debenture holders that the board has resolved to redeem in full the 16 687 500 debentures issued during January 2018 capital raise. The redemption will be consummated in line with Clause 5.6 of the Rainbow Tourism Group Notarial Deed of Debenture dated February 20, 2019,” RTG company secretary Napoleon Mtukwa said in a statement.
The debentures will be redeemed at a price of $1 per debenture, being the par value of each debenture.
A debenture is a medium to long-term debt instrument used by large companies to borrow money at a fixed interest rate.
Mtukwa said the board arrived at this decision primarily after the realisation that the combined value of the three properties relative to the value of the debentures had rendered the financing arrangement sub-optimal.
The debentures are secured by three top hotel assets owned by the company that include Bulawayo Rainbow Hotel, Victoria Falls Rainbow Hotel and A’Zambezi River Lodge.
“Evidently, continued securitisation of the company’s properties against the Zimdollar debentures now shows an inefficient way of utilising the company’s assets. Redeeming all the debentures will allow your company flexibility and an opportunity to explore optimal funding alternatives for growth,” Mtukwa said.
Furthermore, the company said the full redemption would allow debenture holders an opportunity to redeploy their funds into other investment instruments likely to yield returns commensurate with the now obtaining environment.
“The debentures will be redeemed at a price of $1 per debenture, being the par value of each debenture.
Notwithstanding provision 5.6 of the Rainbow Tourism Group Notarial Deed of Debenture which provides for a 60-day notice for redemption from the day of publication of this notice, the company has put in place adequate funding to fully pay the accrued interest for the period between February 22, 2020 and August 21, 2020 and redeem the entire principal on the same day. Debenture holders should thus expect payment of their debenture principle amount plus accrued interest on or about June 30, 2020,” Mtukwa said.