Econet, EcoCash to redeem shareholder debt
Econet Wireless Zimbabwe and EcoCash Holdings Zimbabwe Limited shareholders have approved resolutions allowing the companies to raise US$30,3 million each, to redeem shareholder debt extended five years ago to service loans and fund the company’s expansion.
The resolutions were passed at Extraordinary General Meetings (EGMs) held separately on Monday and were passed with overwhelming majorities.
The development will allow the two companies to raise at least US$30,3 million each through a rights issue offered to existing shareholders at a discounted price.
A renounceable right is an offer issued by a corporation to shareholders to buy more shares of the company’s stock, usually at a discount
The EGM was convened by the board and chaired by Dr Jim Myers, the Chairman of the company.
Voting at the EGM was taken by poll through online voting. There were neither vetoes nor amendments to the resolutions and no new proposal was submitted for voting and approval at the EGM.
The debentures, which matured in April this year, were issued to finance Econet’s expansion plans over five years ago before the demerger of EcoCash Holdings from Econet.
EcoCash Holdings was subsequently listed as a separate entity on the Zimbabwe Stock Exchange.
ZIMBABWE Stock Exchange (ZSE)
An early redemption of part of the debentures — which originally amounted to US$130 million left the two companies still owing US$30,3 million worth of debentures to their shareholders.
But an economic downturn in Zimbabwe made it difficult for the companies to meet their US dollar debt obligations.
A debenture is a type of debt instrument that is not backed by any collateral but by the creditworthiness and reputation of the issuer and is issued by corporates to raise capital for their projects.
Additionally, it is a medium to long-term debt instrument used by large firms to borrow money at a fixed interest rate.
According to the outcome of both EGMs, at least 99,21 percent of the company’s shareholders approved the resolution to empower directors to offer renounceable rights to existing shareholders to subscribe for new shares in the company.
At the same time, 88,74 percent of shareholders agreed that “the rights on offer may only be renounced in favour of existing shareholders of the company,” while 99,14 percent of the shareholders agreed to pay the consideration for the rights offer at a price of US$0.06252 per debenture.
Meanwhile, 83,51 percent of EcoCash Holdings shareholders agreed to implement the renounceable rights offer to raise approximately US$30,3 million.
Market watchers say that while both Econet and EcoCash Holdings are now generating enough foreign currency to pay for the debentures without defaulting, the rights issue will help the companies improve their financial health and use their cash at hand to fund future growth.
Free of US dollar debt obligations, Econet can now focus on upgrading and modernising its network infrastructure while EcoCash Holdings can now elect to invest in new digital infrastructure to stay abreast with emerging new digital technologies and meet its customers’ evolving needs.-chronicle
