Zimbabwe Stock Exchange orders Econet to postpone extraordinary general meeting

Econet Wireless Zimbabwe’s extraordinary general meeting, slated for tomorrow to consider a proposed $130 million capital raise, has been postponed indefinitely, the Zimbabwe Stock Exchange (ZSE) has said.

Econet’s capital call has generated some controversy largely due to its requirement that shareholders would have to pay abroad to subscribe for the rights issue.

Analysts have pointed out that the offshore payments proposal could disadvantage pension funds and other minorities who might not be able to follow their rights.

Econet says it needs to raise the cash offshore to pay off its external debt, which it has increasingly struggled to amortise due to Zimbabwe’s foreign currency crisis.

In a statement issued late yesterday, two days before the EGM, ZSE chair Caroline Sandura said the bourse has asked Econet to defer its vote on the transaction.

“The ZSE board would like to inform the investing public that it has advised Econet to defer the EGM until certain technical issues relating to the rights issue transaction have been clarified to the satisfaction of the ZSE board,” Sandura said.

“In this regard, Econet will publish a supplementary circular in due course explaining these issues to the investing public.”

Econet owes a consortium of creditors — China Development Bank, African Export Import Bank, Ericsson and South Africa’s Industrial Development Corporation — just over $128 million. The company says it has increasingly found it difficult to service the loans due to foreign currency shortages in Zimbabwe.

As a result, and in a bid to avoid a damaging default on the foreign loans, Econet is asking its shareholders to pay for their rights issue shares in US Dollars directly to the Egypt-based Afrexim Bank, where the telecommunications giant holds a debt service account.

Between 2012 and 2014, Econet secured more than $460 million in multi-creditor loans to expand its network and refinance earlier facilities. The company said it intends to clear its secured long term loan obligations, which now stand at $128 million, using the rights issue and debenture cash, the company’s first capital call since its 1998 listing on the ZSE.

Hard-up Zimbabwean minorities have, in recent years, struggled to follow their rights in similar transactions. The requirement to make offshore payments would likely add to the difficulty.

Econet Wireless Global, the privately held anchor shareholder in Econet Wireless Zimbabwe with a 30 percent stake, will underwrite the transaction and could be the biggest beneficiary should the offer be significantly undersubscribed.

The company has seen its revenue and profitability declining in tandem with Zimbabwe’s economic slowdown. Revenue came down from $753 million in FY2014 to $641 million in FY2016, while profit after tax came down to $40.2 million in FY2016 compared to $119.4 million in FY2014.-The Source

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