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Botswana: ABC to Raise Convertible Loan With Citigroup
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Mmegi/The Reporter (Gaborone)
14 March 2008
Posted to the web 17 March 2008
Brian Benza
Gaborone
ABC Holdings limited is set to obtain fresh capital injection of up to US$25 million from international finance firm Citigroup to finance its expansion plans.
Announcing their 2007 year-end results last Wednesday, ABC Group Chief Executive Officer Douglas Munatsi said Citi Venture Capital International (CVCI), a subsidiary of Citigroup, had approved an investment of US$25 million by way of a two-year convertible loan. The new loan comes hardly three months after the International Finance Corporation (IFC) snapped up over 13,8 million shares in ABC after pumping in P37.4 million, taking its shareholding to 10.7 percent in the group.
The IFC has also tabled a US$13.5 million convertible loan for ABC, which, if it goes through, will increase their stake to 23.8 percent. "The terms and pricing of the CVCI offer are broadly in line with those of the IFC convertible loan," Munatsi said. "On conversion, the investment will give CVCI a stake of close to 20 percent in the group." The group, however, said it was vigorously pursuing a rights offer and private placement as an avenue of trying not to dilute the existing shareholders through the new partnerships. "The rights issue and private placement will also strengthen the capital position of the group,' said Munatsi.
ABC, which has its primary listing on the Botswana Stock Exchange, has subsidiaries in four other countries - Zimbabwe, Zambia, Tanzania and Mozambique. The bulk of its business comes from Zimbabwe.Commenting on the group performance in 2007, the CEO said attributable profits to shareholders went up by 44 percent to P123.5 million compared to the prior year of P85.5 million, while non-interest income continues to improve for all its subsidiaries except Zimbabwe. "Average return on equity at 52 percent exceeds the 37 percent achieved in 2006 and is ahead of the group's long term target of 40 percent for the first time. "With the exception of Zambia, all subsidiaries recorded profits in 2007. The subsidiaries outside Zimbabwe contributed P32 million to attributable profit, while Zimbabwean operations continue to perform well, contributing P91.2 million, despite the continued devaluation of the currency, said Munatsi.
The group subsidiaries also struggled, with the cost of debt in the period under review following the injection of the Tier 11 capital in the first half of 2007. But things are starting to shape up in most subsidiaries as the capital has been fully deployed and the company says full results should be felt in 2008. ABC also says the placement of Lobtrans, one of their biggest customers, under provisional liquidation resulted in ABC Botswana's impairment charges rising sharply as P13.9 million had to be set aside for that purpose. Looking ahead, the banking group is very optimistic about the future, particularly in subsidiaries outside Zimbabwe. "All banking subsidiaries are expected to grow in 2008, affirming the sustainability of the group's growth in the future," Munatsi said.
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"We are excited about the new partnerships we are building with international and regional investors, and it is in this regard that the envisaged hybrid offer should further strengthen the group's capital and position it for even greater growth in the coming periods." Munatsi also gave an update on the group's plans to embark on introducing a retail business across the group's footprint, saying the programme was now at an advanced stage.
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