Econet to offer early redemption of debentures to holders

Zimbabwe’s largest provider of telecommunications services, Econet Wireless Limited has given a notice to its Debenture holders inviting them to offer their Debentures to the Company for early redemption, BusinessMail can report.

The Debentures were created under the Debenture Trust Deed that was executed by the Company and the Debenture Trustees on 18 January 2017 and registered with the Registrar of Deeds on 25 January 2017 as Number MA0000089/2017. Clause 2.2 of the Debenture Trust Deed provides that the Debentures shall be redeemable at the end of six years or earlier at the discretion of the Board.

The company shall redeem debentures at the face value of 4.665 US Cents each plus interest thereon calculated at a coupon rate of 5% 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.

In a notice to its debenture holders, the company said that the Board has exercised its discretion to give Debenture holders an opportunity to offer their debentures to the Company for early redemption.

“The reasons why the Board has decided to exercise its discretion to give Debenture holders an opportunity to redeem their debentures early is that 22% of the debentures are held by local debenture holders and the balance is held by foreign holders. 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,” reads the notice.

Although the early redemption of the Debentures held by both local and foreign Debenture holders was pre-approved by the Reserve Bank of Zimbabwe upon the approval of the Circular issued on 17 January 2017, the Company has sought and obtained the further approval of the Reserve Bank of Zimbabwe for the early redemption of the Debentures in Zimbabwe Dollars calculated at the prevailing interbank rate.

The opportunity for the early redemption gives those Debenture holders who wish to exit early, an opportunity to do so and to apply their funds to alternative investments, gives the Company an opportunity to strengthen its balance sheet by reducing the amount of its foreign currency exposure and to minimize any future exchange losses that might result from the weakening of the Zimbabwe Dollar against the United States Dollar, affords the Reserve Bank of Zimbabwe, the opportunity to manage liquidity in the market as the aggregate redemption value of the Debentures on maturity, of USD72,955,002, inclusive of interest, is significant in the context of our economy and it also benefits the Company in that the cash outflows can be managed over an extended period of time.

“The opportunity to offer Debentures for early redemption shall be available to Debenture holders during the period commencing at 0900 hours on 19 July 2021 and ending at 1600 hours on 2 August 2021 (“the offer period”),” reads the notice.

A debenture is a way that larger, public limited companies might borrow money at a fixed rate of interest. The company borrows money from the lender, who’s then called a “debenture holder”.

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