Blue Financial Services, the pan African micro lender is said to have suspended its fundraising drive it announced in May saying the move would not have been in the best interest of the company.
The group said on a Botswana Stock Exchange (BSE) filing that it has suspended talks until shareholders get crucial financial data. “Shareholders are hereby advised that the Company has suspended the discussions regarding a restructure of the Company with external parties until all relevant financial information has been made available to shareholders,” it said as it withdrew the cautionary.
The move follows an announcement published on the Stock Exchange News Service (SENS) of the JSE Limited on 27 May 2015 and 8 July 2015, whereby shareholders were updated on the developments at Blue. The company had wanted to raise at least R750 million (over P600m) in a recapitalisation programme aimed at ensuring the company’s sustainability.
“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,” Blue said in May.
“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”.
The muted recapitalisation proposal consisted 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 percent equity interest.
However, this was finally settled at 8, 9 percent which had the result of the group having to de-recognise its Nigerian operation from its consolidation.
South Africa’s financial daily BusinessDay reported that Blue’s CEO Johan Meiring said there was the option of disposing of some entities, but were not doing that anymore. “The board is not in favour of disposing of assets.”
Blue has six Africa subsidiaries or trading entities with a combined positive Net Asset Value (NAV) and the ability to be sustainable provided the immediate introduction of new high yielding products together with 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 Bloomberg’s information as 26/06/2014, the company operates 220 branches in South Africa, Botswana, Zambia, Uganda, Tanzania, Malawi, Mauritius, Nigeria, and CMA.