The shareholders of Econet Wireless and EcoCash Holdings have approved resolutions allowing the companies to each raise US$30,3 million to redeem shareholder debt extended five years ago.
The resolutions were passed at extraordinary general meetings (EGMs) held separately on Monday, and were passed with overwhelming majorities.
They 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.
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.
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.
Econet on Wednesday said at least 99,21% 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% of shareholders agreed that “the rights on offer may only be renounced in favour of existing shareholders of the company,” while 99,14% of the shareholders agreed to pay the consideration for the rights offer at a price of US$0,06252 per debenture.
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Meanwhile, 83,51% of EcoCash Holdings shareholders agreed to implement the renounceable rights offer to raise approximately US$30,3 million.
In addition, 91,23% of the group’s shareholders approved that the rights on offer may only be renounced in favour of existing shareholders of the company, and that they pay for the debentures at a price of US$0,06252 per debenture.
Market watchers say that while both companies 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.
Econet feels the rights issue would also allow the telco to focus on upgrading and modernising its network infrastructure while EcoCash Holdings could invest in new digital infrastructure to stay abreast with emerging, new digital technologies and meet its customers’ evolving needs.
