Business Reporter
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 ZWL.
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$30,3 million apiece to settle the debentures stemming from the 2017 capital raise.
“Given current available information and assuming the interbank exchange rate maintains the current trajectory, exercising the rights in ZWL appears to be attractive at a discount rate of 32% (based on today’s matrix) versus a dilution effect of 8,9%,” IH Securities said in an analysis of the new rights offer.
“Exercising the rights in USD seems to be our second-best option at a discount of 8%. Selling LAs (letters of allocation) becomes our third option while doing nothing is the last option as in the latter one is guaranteed a dilution of 8,9%, zero discount and no proceeds from the sale of LAs. Consideration should be given to transaction costs relative to shareholding size.”
An LA is a letter to a possible buyer telling them the number of new shares that have been made available they will be offered. “When Econet is physically allocated US$ 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.
Exercising the right in local currency entails, the investor paying a “deposit” at that day’s rate in ZWL.
-AMH
