Econet considering debentures to equity conversion

HARARE – Econet Wireless Zimbabwe could be considering a debenture to equity conversion, people with knowledge in the matter have said. This comes after the group issued a cautionary statement to shareholders in which it said it was engaged in discussions and is considering various proposals, which if implemented may have a material impact on the value of the company’s shares.

Well-placed sources told FinX that the group might be looking at converting outstanding debentures into equity. This comes as the group last year raised $130 million through a rights issue and a linked debenture sale. During that time, shareholder concerns had been raised on the structure of the debenture and through an amended resolution, which was passed, Econet had a buy back option of the debentures for those who did wish to hold on to them. Econet argued then that the debenture was an instrument which would give investors a definite return. The sources said over the past few weeks, Econet has been approaching investors who wish to sell their debentures.

“Econet is full of surprises and there is speculation on what their cautionary could be about but everything points to the debenture/equity conversion, given that they have been buying them back.”

At its last results briefing, Econet said it desperate to find a quick solution to circumvent regulatory challenges which had hampered plans to list $50 million debentures on an external securities exchange to protect value for shareholders who bailed out the company.

Econet said while its board had wanted to list the debentures issued by the company on an external securities exchange shortly after the rights issue, the relevant authorities did not approve the request for a sinking fund, which it intended to use to repay the liability.

The cautionary may also relate to plans for an initial public offering by Liquid Telecom in London. However, market players say this is highly unlikely as Econet only owns a part (51%) of Liquid Zimbabwe and not the broader Liquid Telecom. Others say that it could signal the unbundling of either Cassava (which holds Ecocash) or Steward Bank from  the group.

“Shareholders, debenture holders and members of the investing public are therefore advised to exercise caution and consult their professional advisors before dealing in the company’s shares until further details of the transaction(s) are announced or upon withdrawal of this cautionary,” said Econet in the cautionary statement.

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