1 February 2013

Zimbabwe: Private Placement to Boost NMB's Liquidity

NMB Holdings shareholders are set to benefit from improved liquidity following the recent granting of full fungibility of NMB shares by the Reserve Bank of Zimbabwe (RBZ), CE James Mushore said.

In a landmark development, NMBH this week announced the RBZ had granted full fungibility for up to 40% of the banking group's shares, allowing transfer of shares between the London Stock Exchange register and the local share register.

In the equities market, shares listed on more than one exchange are considered fungible when they can readily be bought and sold across the exchanges. NMBH yesterday also disclosed the three strategic foreign investors who will inject US$14,831 in the financial services group through a private placement.

These are - private equity firm AfricInvest Capital Partners, Dutch Development Bank (FMO) and Nowergian Development Institution (Norfund). The three are taking up 103 714 287 in equal shares worth US$4 943 715 each.

In addition, Norfund has pledged further support of US$1,4 million in the form of a subordinated loan, bringing the total new money that will boost NMBH's balance sheet to US$15,731 million.

On fungibility, CEO Mushore said when NMB originally listed, it raised £30 million (US$45million) on the LSE, where it also made a secondary listing.

"The granting of full fungibility for NMBH shares allows those of our investors who may wish to trade in and out of NMB shares to do so on the same terms and price, whether they buy them in London or in Zimbabwe," he said.

Mushore said differences would arise from the fact that in London the shares are traded in British pounds while in Zimbabwe shares are denominated in US dollars.

" However, the stock exchanges will use open market (foreign currency) exchange rates between the US dollar and the pound which are publicly available, so the real price differential between the two exchanges will be minimal," he said.

According to NMB, the portion of shares allowed for full fungibility has been capped at 40% of the shares, irrespective of whether they are on the local or foreign register.

"A shareholder should be able to sell his or her entire shareholding in London provided the shares don't exceed 40% of the listed shares in the company," Mushore added.

Chartered Financial Analyst with MMC Capital Itai Chirume said the foreign shareholders, particularly private equity investors, need a very clear exit strategy each time they invest.

"That is why we needed to ensure that we have a mechanism through which shares can move seamlessly between the two share registers. This particular share characteristic will make the shares more liquid and therefore possibly more desirable, particularly to foreign shareholders," Chirume added.

According to Chirume, fungibility would have an overall positive outcome for the stock.

NMB is a cross listed stock, meaning that its shares on the London register and Zimbabwe register should be exactly the same.

Fungibilty helps to ensure that a share in the company on one exchange is exactly the same in all respects as one purchased elsewhere.

Meanwhile, according to the bank's circular to shareholders, the new funds from the foreign investors would accelerate the bank's organic growth and enable it to meet the new capital thresholds set by the RBZ late last year.

Commercial Banks are required to register US$50 million in shareholders' funds by June 30 this year and US$100 million by June 30 2014.

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