ECSPONENT ANNOUNCES INDICATIVE AMENDMENTS TO PREFERENCE SHARE TERMS TO AVOID COMPULSORY CONVERSION TO ORDINARY SHARES
R200 MILLION RECAPITALISATION NEGOTIATIONS UNDERWAY TO REDUCE BALANCE SHEET DEBT BY 30%
03 March 2020. Pretoria. JSE-listed Africa financial services group Ecsponent Limited (“Ecsponent” or “the Company” or “the Group”) announced further details on its undertaking to explore various options relating to the capital restructure of its preference share programme in order to avoid the compulsory conversion of preference shares to ordinary shares.
“We remain confident of presenting sustainable solutions that will align the returns and capital redemption profile of the preference shares with the returns expected from the current asset base in our portfolio,” acting CEO, George Manyere said.
“Our objective remains avoiding having to convert the preference shares to ordinary shares. These alternative options will protect preference shareholders’ rights to preferential capital redemptions. It will also provide shareholders with redemptions on certain trigger events, such as the sale of investments.”
“We are committed to seeing the Company settle its obligations towards preference shareholders as and when the Company realises value from its underlying investments and we believe this is possible in the medium to long term,” Manyere continued.
In terms of the proposed amendments to the Company’s Memorandum of Incorporation (“MOI”), preference shareholders retain the option to convert to ordinary shares at any time prior to a redemption, with similar rights to the current automatic conversion.
The indicative amended preference share terms include:
- redeemable or partially redeemable at the discretion of the Board a) having regard to the funds available to the Company, or b) on the exit by the Company of any investments within the Group;
- convertible into ordinary shares at a fixed ratio at the option of the holder; and
- zero coupon, but with dividends to be paid at the discretion of the board, guided by a committed dividend policy.
Further details of the proposed amendments to the MOI will be announced on SENS and will be included in a circular to shareholders, which will be distributed in due course.
The amendments to the MOI do not impact other areas of Ecsponent’s business or its subsidiaries.
The Company further announced that it has entered into negotiations with its largest shareholder, the MHMK Group, to partially recapitalise the Company’s balance sheet through a subscription for further ordinary shares in the Company in exchange for the delegation of debt owing to a third party, an unrelated creditor. MHMK is the investment arm of The George Manyere Family Trust.
The value of the debt-for-equity exchange is an estimated R200 million and will reduce Ecsponent’s debt funding by approximately 30%.
“As the largest shareholder in Ecsponent, I am strongly aligned with the interests of all shareholders. Everything we do is aimed at ensuring the long-term sustainability and growth of the Company.”
“I hold a long-term view on my investment and see huge potential in the company, its people and assets. There may be opportunities to seed further assets into Ecsponent to further bolster the asset base and we are currently seized with evaluating various options” Manyere commented.
As founder and former Chief Executive Officer of JSE-listed private equity firm Brainworks, Manyere has a track record of deal making and unlocking value from investments in difficult markets on the continent. Brainworks is mostly known for being the first company from Zimbabwe to be listed on the JSE and also for being the first successful private equity firm from Zimbabwe which was built by locals and successfully acquired struggling businesses in banking, microfinance, tourism, real estate and logistics and turned them around into profitable businesses. Brainworks also served as a leading advisory firm in Zimbabwe which successfully handled advisory deals with a value in excess of US$600 million.
Manyere left Brainworks in February 2017 and disposed of his stake in the company in December 2017 to pursue other opportunities, including his investment in Ecsponent.
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About Ecsponent Limited
Ecsponent Limited (JSE: ECS) is listed on the JSE’s main board under the Financial Services – Specialty Finance sector. Ecsponent is an investment firm that manages multiple alternative asset classes on and off balance sheet, including private equity, asset management, renewable energy (pending), fintech, , mining and credit. The firm has a portfolio of investments in 8 countries in Southern Africa. Ecsponent aims to create value for its stakeholders by (i) proactively managing its investments with a view to enhancing value and being cash generative and (ii) seeking exits from its investments to realise cash and targeted returns.