Mushore says part of the US$10 million will go towards meeting part of the bank’s capital requirements. About US$2 million will go towards Information Technology while the remainder will be ploughed back into the business.
In a telephone interview with businessdigest on Tuesday, he said: “Part of the money will go towards meeting statutory capital requirements. About US$2 million will go into IT. The decision to go for a rights issue has been necessitated by the realisation that we have shareholders who support the company in such initiatives after some of our shareholders felt that a private placement was not necessary if they can follow their rights.”
Mushore, who took over management of the bank a few months ago after five years in the United Kingdom, says African Century will now underwrite the rights offer. He is optimistic shareholders will support the exercise.
African Century, which was founded over two years ago by former Morgan Stanley International chairman and chief executive Jonathan Chenevix-Trench, had committed to spend £3,6m on a 25% stake in NMBZ Holdings, the parent company of NMB Bank.
But judging by past rights issues where companies got subscription rates of below 70%, African Century could still emerge with a significant chunk of shareholding in the bank. Underwriters have snapped up significant shareholding in companies after rights issues were undersubscribed, leaving them with millions of dollars worth of securities.
A rights issue is when current shareholders are offered a “right” to purchase additional new shares in the company at a discount to the market price on a stated future date, an appealing way of raising cash in Zimbabwe as financial institutions grapple with liquidity constraints and punitive interest rates. Subscription rates have varied for the companies which were on the market and the lowest was 21,9% for the ART Holdings, which left the underwriters with the burden of providing cash equivalent to the unsubscribed shares.
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ART sought to raise US$4, 6 million but its shareholders managed to raise slightly more than US$1 million leaving CBZ and Interfin, the two underwriters, with US$3, 5 million worth of shares.
OK Zimbabwe opened its rights offer on March 26 and 70, 4% of the 250 375 139 shares were taken up at US$0, 06 per share, representing the highest subscription rate since multiple currencies were introduced. This left the underwriter, Investec with 7% of the retailer’s total issued share capital after the rights issue. Investec also advanced a US$5 million loan to the company.
Last year, NicozDiamond shareholders subscribed for 67% of shares of the company floated in the capital raising exercise. FBC, the latest company on the market to raise capital, sought US$8 million for its building society and reinsurance arms. It scored a 65,76% subscription rate after 150 138 392 of the 228 312 640 issued shares were snapped by current shareholders leaving Genesis Investment Bank, the underwriter, with US$2,7 million worth of shares.
Underwriters work closely with the issuing company to determine the offer price of the securities, buys them from the issuer and sells them to investors.NicozDiamond, African Sun, ART Holdings, Fidelity, CFX Financial Services, OK Zimbabwe and FBC Holdings are some of the companies that have floated new shares in a bid to raise capital since Zimbabwe adopted the use of multiple currencies in February last year.
At least four other companies are weighing options of either rights issue or other possible ways of raising cash and these include Meikles, Mwana Africa, Tedco and Steelnet.
Chris Muronzi/ Leonard Makombe
