Blue Financial Services, the pan African micro lender said in a note that its recapitalisation proposal has to work or it might be forced to dispose some of its assets.
The Botswana Stock Exchange (BSE) listed micro lending outfit told shareholders in a circular that a recapitalisation programme of at least R750 million (over P600m) is required to facilitate the sustainability of the group.
“The Group is well positioned to grow its core investments. It is however imperative that the recapitalisation programme succeeds to enable that growth,” the company said.
“In the event that the recapitalisation programme does not proceed, the Company will proceed to settle outstanding obligations through the disposal of assets and trading entities.”
“The preferred way forward is to proceed with a recapitalisation programme of R750 million which will result in a positive NAV sufficient to facilitate sustainability. This process will reduce debt and raise new cash for growth,” it said.
The recapitalisation programme consists of the previously reported Debt Rescheduling Agreement (DRA) debt to equity conversion of R468 million and a rights issue of R282 million.
Blue has been having difficulties ever since the failure of its turnaround strategy that was halted by a forensic probe into the company’s affairs. The strategy came on the back of Mayibuye Group Proprietary Limited equity take-over in the group.
The situation was made worse by the overcrowding in the South African market while it was forced to merge operations in Zambia. Blue also had difficulties in Nigeria as it was the subject of much controversy and the Central Bank of Nigeria, based on the actions prior to the turn-around started, refused to recognise the Groups 65% equity interest.
However, this was finally settled at 8,9% which had the result of the Group having to de-recognise its Nigerian operation from its consolidation.
“In April 2013 the Group was in the final stages of concluding a partial credit guarantee for R500 million for a capital raising program of R2 billion,” Blue said.
“This would have allowed the Group to fully utilise its infrastructure and leverage its extensive African footprint, resulting in profitable trading and the creation of value for all stakeholders. It was further in discussion with Mayibuye to further recapitalise the Group.”
Blue has six Africa subsidiaries or trading entities with a combined positive Net Asset Value (NAV) and the ability to be sustainable provided there is the injection of new capital.
The company said it prefers to retain and grow these investments, leveraging the recapitalisation programme. Its non-core subsidiaries include Swaziland, Lesotho and Kenya with small (less than 10%) minority stakes in Nigeria and Zimbabwe.
According to Blooberg’s information as 26/06/2014, the company operates 220 branches in South Africa, Botswana, Zambia, Uganda, Tanzania, Malawi, Mauritius, Nigeria, and CMA.
Blue Financial Services seeks over P600m recapitalisation funds
