Saturday, November 02, 2013

(LUSAKATIMES) ZCCM IH is insolvent, proposes share offer to raise funds
Time Posted: October 5, 2013 3:33 pm

ZCCM Investments Holdings says it would be offering stock to its existing shareholders for sale in a bid to raise funds to pay off its debt and seek opportunities in new developments.

ZCCM IH is an investment company owned by the Zambian government with an 87.6% stake while private equity investors hold a 12.4% stake. In a statement, ZCCM-IH said it would use a portion of the funds to reduce its USD 379 million debt it owed to the government of Zambia.

The company said this huge debt has suppressed the value of the company and made the company unattractive to investors and the market.

The balance sheet of ZCCM-IH for the year ended 31 March 2012 carried total liabilities of K2, 352 million against total assets of K2, 302 million resulting in a negative book value of K50.5 million.

The bulk of the liabilities constitute debt owed to the GRZ carried over from ZCCM.

The company said the GRZ indebtedness has severely constrained its balance sheet in the recent past and that this has affected valuation of the Company by the market and limited the capacity of Management to unlock value for the benefit of shareholders.

“Taking into account the high volatility associated with copper prices, the unpredictability of dividends from investee companies, and other related factors that impinge on the revenues of the Company, the Board of Directors of ZCCM-IH believes that it is imperative that the balance sheet of ZCCM-IH be restructured as a matter of urgency and that priority be the reduction or elimination of the current debt burden,” the statement read.

“In so doing, the Company will be put on a sustainable trajectory going forward and thus will maximise shareholder value.”

The company said in order to implement the Strategic Plan and achieve its critical objectives, the Board has recommended that the Company should immediately undertake a Share Rights Offer to all shareholders.

A Rights Offer is an offer made to existing shareholders of a company to subscribe for new shares on a pro rata basis.
It is a common mechanism for raising a large quantum of capital relative to existing market capitalization, particularly where shareholders do not wish to be diluted.

The company hopes the rights offer would de-gear its balance sheet by expunging GRZ debt of K1, 998 million (approximately US$ 363 million) and thereby unlock the value of the company for the benefit of all shareholders.

It said the rights offer would ensure ZCCM-IH remains financially solvent and able to continue as a going concern.

ZCCM-IH has minority shares in Mopani, KCM, Kansanshi and a host of other mining and related companies.

The Company has a primary listing on the Lusaka Stock Exchange Zambia and currently has non active secondary listing on the London Stock Exchange and some shares are traded on the Euronext stock exchange in Paris.

ZCCM-IH is the privatized entity formerly known as Zambia Consolidated Copper Mines Limited.

In 2000 ZCCM was privatized by the Government of Zambia.

ZCCM-IH emerged from the privatization of ZCCM as an investments holdings company with equity stakes of between 10 to 20.6% in the new companies that were formed from the unbundling of ZCCM.

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