• The estimated net proceeds from the Rights Issue will be used to redeem the debentures in terms of the circular under which the Debentures were created and in terms of the Debenture Trust Deed
• The Debentures in the Capital of the Company that have a maturity date of 30 April 2023
• The Company is not able to secure foreign currency for purposes of redeeming the debentures from the auction

Harare- In a cautionary announcement dated 27 April, the listed company Econet Wireless Zimbabwe Limited (“the company”) detailed its proposed Rights Offer. This comes 20 days after considerations began with an initial proposal to call for an Extra Ordinary General Meeting of Members for the purpose of considering a renounceable rights issue (the “Rights Issue”) of new ordinary shares in the capital of the Company (the “Rights Shares”) to raise a total amount of approximately US$30.3 million that is required to redeem the outstanding Debentures in the capital of the Company.

During a rights offering, existing common stock shareholders are allowed to purchase newly issued shares at a discount to the price that will be offered to the public at a later date. The “right” given to the owner of outstanding shares is similar to a stock option. Each holder of rights has the option to purchase a specified number of new shares of the company’s stock at a specified purchase price on a certain date. Simply put, a renounceable right is an invitation to a company's existing shareholders to buy additional new shares in the company. However, shareholders can renounce that right, meaning that they can trade those rights on the open market.

The recently released announcement clarified that the purpose of this Rights Offer is to raise the aforementioned USD30.3 million required to redeem the Debentures in the capital of the company that have a maturity date of 30 April 2023.

The underlying rationale of the proposed Rights Offer is to maintain its creditworthiness. If the Company fails to secure the funds required to make good on its debt, it will be faced with the risk of defaulting on its debenture maturity obligations. Moreover, this will damage the company’s prospects of accessing future loan facilities.

Regarding the liquidity necessary to settle debt, the Company has reported that it is unable to secure foreign currency for the purpose of redeeming the debentures from the auction.  The company has also detailed that it faces competing needs for the foreign currency it generates with the highest priority being given to the financing of the upgrading of the network infrastructure and the technology in use by the Company. Resultantly, the only available option is to raise the required foreign currency from members through the Rights Offer.

The technical details such as the means by which the issuing price of the Rights Offer will be calculated, the opening and closing dates of the rights offer, matters such as currency which is to be used to subscribe for the rights offer shares are retailed on the cautionary statement which can be found on the Company website’s Investor Relation section. -Equity Axis