FINANCIAL technology outfit EcoCash Holdings Zimbabwe plans to raise about US$30,3 million to redeem the outstanding debentures issued six years ago to settle external loans, company secretary Charmaine Daniels said.
A debenture is a long-term loan that a corporate or government raises from the public for capital requirements. It is not secured by collateral.
The EcoCash debentures stem from a US$128 million capital raise exercise in 2017, about half of which were debentures, as the company sought to mobilise the foreign currency needed to settle external loans.
Between 2012 and 2014, Econet obtained external loans amounting to about US$460 million to finance network expansion and meet obligations from earlier debts, which were due.
The transaction underwriters, Econet Global Limited, served as the guarantors of the foreign debt, which had a value of US$128,19 million.
Creditors that were meant to be paid from the proceeds of the rights issue and debenture instrument included Ericsson, Industrial Development Corporation (IDC) of South Africa, African Export-Import Bank and China Development Bank.
At the time of the rights offer in 2020, Econet Wireless Zimbabwe offered, on a voluntary basis, early redemption of the capital and accumulated interest on debentures issued in March 2017.
But the group revealed in its financials for the year ended February 28, 2022, that only 22% of debenture holders exercised the option for early redemption as the fintech company sought to mitigate against exchange risk for the debentures which mature in April 2023.
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“Shareholders are advised that the board of directors of EcoCash Holdings Zimbabwe Limited is considering proposals to call for an extraordinary general meeting of members for the purpose of considering a renounceable rights issue of new ordinary shares in the capital of the company to raise a total amount of approximately US$30,3 million that is required to redeem the outstanding debentures in the capital of the company,” Daniels said in a cautionary announcement to shareholders.
“Accordingly, shareholders and the investing public are advised to exercise caution when trading in the company’s securities until such time as the full details of the proposed rights issue are published.”
EcoCash Holdings recorded revenue of $45,4 billion for the half year ended August 31, 2022, compared to $42,5 billion in 2021. Most of the revenue was driven by the fintech business followed by insurtech and lastly digital platforms.
The firm said the fintech business, anchored by EcoCash and Steward Bank, remained the largest contributor with performance being driven by new product innovations, and growth in the banks’ forex revenue, a result of the deliberate growth in the United States dollar loan book and foreign currency accounts.
The group achieved a profit before tax of $911,1 million, an improvement from the prior period’s loss before tax position of $106,2 million.
