Econet seeks early settlement of US$73m debt

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.