24 May 2010

Zimbabwe: FBC U.S.$8 Million Rights Offer Receives 66 Percent Response

Harare — FBC Holdings Limited's US$8 million rights offer received a 66 percent shareholder response making it one of the fairly successful rights issues this year.

The financial services group had offered shareholders a total of 228 312 640 ordinary shares, which were available at 0.035 US cents per share on the basis of 63 new shares for every 100 ordinary shares already held in the group.

Existing shareholders of FBC took away a total of 150 138 392 shares while the underwriters of the rights offer snapped the balance of 78 174 248 shares.

FBC company secretary Mr Tichaona Mabeza said: "The rights offer shares not subscribed for by shareholders have been taken up by the underwriters".

The capital-raising scheme was approved by shareholders last month during an extraordinary general meeting of the listed financial services group.

The Zimbabwe Stock Exchange listed group required the funds to recapitalise subsidiaries FBC Building Society and FBC Reinsurance in line with central bank and the insurance commission's regulatory requirements.

FBC's flagship, FBC Bank and the securities subsidiary were already adequately capitalised in line with the central bank's regulatory requirements.

In this regard, US$5 million raised from the rights issue would be channelled to FBC Building Society and US$2,5 million would go to FBC Reinsurance.

The Reserve Bank of Zimbabwe set the regulatory minimum capital requirements at US$12,5 million for commercial banks, US$10 million for building societies and merchant banks, US$7,5 million for finance houses and discount houses and US$500 000 for asset management companies.

Analysts said the FBC rights offer could have been more successful, but some shareholders bought the shares on the ZSE, as were they cheaper than rights issue shares. The FBC Holdings shares are trading at US$0,031 on the ZSE.

Although they risked dilution by not participating in the rights issue they had already cushioned themselves by increasing the number of shares they held in the group.

Nonetheless, FBC' rights offer remains one of the fairly successful rights issues to date, since the country adopted the multi-currency system, which constrained liquidity as the country is no longer printing money.

Subdued productive sector activity means the country can not generate enough inflows to meet its requirements and that scenario resulted in total banking deposits since January 2009 amounting to US$1,4 billion in March 2010.

The most successful right offer to date was the one floated by OK Zimbabwe, which received a 70 percent support from the company's shareholders.

At above 60 percent, most rights offers may be classified successful considering the liquidity crisis in the country after dollarisation of the economy.

The least successful right offer was the US$10 million rights issue floated by CFX Financial Services, which received less than 3 percent shareholder support.

Although Starafrica, African Sun and NicozDiamond rights offers were also fairly successful, they could not breach the 70 percent reached by OK Zimbabwe.

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