Econet offers early redemption for debentures

July 15, 2021

BUSINESS REPORTER

 

The Reserve Bank of Zimbabwe (RBZ) has granted Econet Wireless Zimbabwe’s debenture holders the nod to opt for an early redemption in local currency at the prevailing interbank rate.

 

However, the redemption will be done over an extended period between 2021 and 2023, due to the significance of the amount involved, the company said in a notice to debenture holders.

The offer for early redemption runs from July 19 to August 2.

The debentures will be redeemed at a face value of US$0.04665 each plus interest 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 dollar at the prevailing interbank rate as at the date of payment.

Econet said 22% of the debentures are held by locals and the balance by foreign holders and 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,” it said.

The company said those that exit early have an opportunity to their funds to alternative investments.

Econet said the early redemption will 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.

It said early redemption affords the RBZ, which has insisted on an extended redemption period, the opportunity to manage liquidity in the market as the “aggregate redemption value of the debentures on maturity, of US$72,955,002, inclusive of interest, is significant in the context of our 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.

The debentures were issued in 2017 and will  mature after six years.

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