Follow your rights, securities firm tells Econet shareholders
LOCAL research firm Inter-Horizon (IH) Securities has said it is more attractive for Econet Wireless Zimbabwe (EWZ) shareholders to exercise their rights offer in local currency should the interbank rate maintain its current trajectory.
Zimbabwe’s largest telco, EWZ, together with its sister company EcoCash Holdings Zimbabwe Limited (EHZL), in April announced their failure to raise enough forex to redeem their remaining debentures from a 2017 rights offer worth US$130 million.
The capital raised through the offer was meant to service foreign debt worth over US$100 million relating to infrastructure maintenance for EWZ and EHZL, before they unbundled to separate entities.
Thus, EWZ’s and EHZL’s April announcement came with a new rights offer of US$30,3 million apiece to settle the debentures stemming from the 2017 capital raise.
“Given current available information and assuming the interbank exchange rate maintains the current trajectory, exercising the rights in ZWL appears to be attractive at a discount rate of 32% (based on today’s matrix) versus a dilution effect of 8,9%,” IH Securities said in an analysis of the new rights offer.
“Exercising the rights in USD seems to be our second-best option at a discount of 8%. Selling LAs (letters of allocation) becomes our third option while doing nothing is the last option as in the latter one is guaranteed a dilution of 8,9%, zero discount and no proceeds from the sale of LAs. Consideration should be given to transaction costs relative to shareholding size.”
An LA is a letter to a possible buyer telling them the number of new shares that have been made available they will be offered.
Exercising the right in local currency entails, the investor paying a “deposit” at that day’s rate in ZWL.
“When Econet is physically allocated US$ through auction, the investor shall then be informed of the remaining balance they have to pay based on the auction rate on that day,” IH Securities said.
“In addition, Econet will charge the investor interest on that same remaining balance as they will have to pre-fund in order to be in the queue for auction US$, this will be added to the balance calculated above. On this background, the rate of conversion when subscribing in ZWL will remain unknown until the day Econet is allotted the USD.”
EWZ intends to raise foreign currency amounting to approximately US$30 319 771.
“Following exchange control approvals, members who are designated as local resident in the register of members of the company as at the record date (September 1, 2023) [the resident shareholders], shall have an option to follow their rights in local currency [ZWL],” IH Securities said.
“The final ZWL price for the shares shall be determined on the date the company is allocated foreign currency on the interbank market for the purpose of redeeming the debentures in accordance with the exchange control laws of the country.”
IH Securities said upon payment of a deposit in respect of each share, calculated by multiplying the US dollar subscription price for each share by the prevailing interbank rate, plus a 10% margin, a subscribing member…
“…shall be issued and allotted each share to which the deposit relates as not fully paid and subject to a capital call and to the company’s lien over shares issued but not fully paid for in terms of the articles.”newsday
