The Zimbabwe Stock Exchange listed mobile operator and largest mobile telecoms firm has made an offer to willing holders of the US dollar denominated securities to redeem their debentures for payment in Zimbabwe dollars at the ruling auction rate.This for those issued in 2017 to raise funds to expunge its external debts
Econet has made the offer to the debenture holders to redeem their investments at a face value of US$4,665 plus interest thereon calculated at a coupon rate of 5 percent per annum from date of issuance.
Debenture holders shall be entitled, during the offer period, to offer all or some of their debentures for early redemption over the central bank approved extended period from April 2021 to April 2023.
The debentures form part of an earlier capital raise programme by Econet where the company sought to mobilize US$128 million, nearly half through debentures, needed to expunge the firm’s external debts.
The debts included a US$300 million syndicated loan secured after 2009 for network expansion. Creditors included Ericson, Industrial Development Corporation of South Africa, Afreximbank and China Development Bank.
Econet revealed in 2018 that between 2012 and 2014, the country’s largest network operator had obtained an estimated US$460 million to finance rapid mobile network expansion.
In 2017, Econet issued a total 1 166 906 618 debentures (valued circa US$54m), which would mature after six years, but are all now available for early redemption, as provided for under terms of the issuance.
Twenty two percent of the holders, Econet said, were local investors while the balance was held by foreigners. The company said if it waited for maturity, holders may be prejudiced, as they will queue for scarce forex.
“This could put pressure by increasing the demand for foreign currency on the foreign exchange auction. Thus the opportunity for the early redemption of the debentures allows for the early redemption in smaller tranches over an extended period of time,” Econet said.
The company indicated in a notice to the debenture holders that it had resolved to initiate early redemptions spread over time as this would give it the opportunity to manage its cash flows over an extended period of time.
Econet said early redemption will give it an opportunity to strengthen its balance sheet by reducing foreign currency exposure and minimise potential future exchange losses from a weakening Zimbabwe dollar.
Further, Econet contends early redemption gives the Reserve Bank of Zimbabwe, which has insisted on an extended redemption period, latitude to manage liquidity constraints given the huge pay out of US$72 million (including interest) on maturity.