HARARE - Listed Chemco Holdings Limited (Chemco) plans to convert a debt owed to TSL Limited (TSL) into equity.
Consequently, TSL — owed around $2 million — will increase its shareholding to 81, 64 percent in the agro-focused group.
Chemco will also delist from the Zimbabwe Stock Exchange.
The transaction awaits shareholder approval at an extraordinary general meeting to be held next month.
This comes as structural changes in demand from key markets, high overheads and inability to effectively recapitalise operations have resulted in Chemco generating revenues and cash flows insufficient to support operational and financing costs.
Under the proposed deal, up to $2,6 million worth of debt and trade payables will be converted into Chemco shares at a price of $0,17 per share resulting in the issue of 15 536 588 Chemco shares.
“The ordinary shares will then be allocated to TSL by way of a private placement,” Chemco told shareholders yesterday.
Over the past three years, Chemco has had to borrow from financial institutions and TSL, its major shareholder.
Of this debt almost $2 million is owed to TSL which was provided to the company in the form of an eight percent per annum shareholders loan while the remainder of the debt was in the form of a $327 000 bank facility.
“Because of its poor operational and financial performance, the company is unable to pay off these obligations along with $ 330 679 worth of third party payables,” Chemco said.
Its board was therefore proposing a transaction that would result in the conversion of the shareholders loan, the bank overdraft and trade payables that are to be assumed by TSL, into ordinary shares to be issued to TSL.
In order to successfully undertake the corrective actions required, TSL has decided to engage the minority shareholders of Chemco with view to acquiring the issued shares of Chemco it currently does not own through a share swap.
“The transaction will effectively dilute minority shareholders by approximately 49,51 percent and TSL’s shareholding in Chemco will increase from 62,92 percent to 81,64 percent,” Chemco said.
Under the share swap agreement, TSL will exchange one of its shares for every 1,88 Chemco shares currently held by minority shareholders.