Econet wants early settlement of US$73m debt

HARARE – Econet Wireless is seeking an early redemption on US$72,9 million worth of debentures held by both local and foreign investors as the group looks at taking advantage of the availability of foreign currency on the auction system as well as minimise any future exchange losses.

The debentures will be paid in local Zimbabwe dollars calculated at the prevailing interbank rate which traded at $85,6 to US$1 at the last count on Tuesday.

The debentures which had a six-year tenure up to January 2023, stem from a $130 million capital raise exercise, about half of which were debentures, which Econet undertook in 2017, as the company moved ahead of time to mobilise the foreign currency needed to settle external loans. 

These debts included the $300 million post dollarisation syndicated external loans Econet obtained to finance expansion.

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.

Econet said the proposed early redemption of the 1 166 906 518, 5 percent unsecured debentures will allow the company to strengthen its balance sheet by reducing the amount of its foreign currency exposure and to minimise any future exchange losses that might result from the weakening of the Zimbabwe dollar against the United States dollar.

The mobile network giant also said the early redemption of the debentures affords the Reserve Bank of Zimbabwe, which has insisted on an extended redemption period, the opportunity to manage liquidity in the market as the aggregate redemption value, inclusive of interest, is significant in the context of the Zimbabwe economy. 

“Early redemption over an extended period, in accordance with the requirements of the Reserve Bank of Zimbabwe, benefits the company in that the cash outflows can be managed over an extended period of time,” Econet said in a notice to debenture holders. 

Econet, which has delayed releasing its February 28, 2021 year end financials due to Covid-19 related issues, said if the Company waits for the maturity date, Debenture holders may at that time be prejudiced as they will all have to queue up for the scarce foreign currency at the same time.

“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 redemption of the debentures in smaller tranches over an extended period of time,” reads part of the notice.

The opportunity also gives those Debenture holders who wish to exit early, an opportunity to do so and to apply their funds to alternative investments. 

The Debentures shall be redeemed at the face value of 4.665 US cents each plus interest thereon calculated at a coupon rate of 5 percent per annum and compounded annually from the date of issue up to the date of payment, to be converted to Zimbabwe Dollars at the prevailing interbank rate as at the date of payment.  

Debenture holders who choose not to offer some or all of their debentures for early redemption will retain those Debentures on the terms and conditions on which they were issued.