The National Social Security Authority has increased its shareholding in Rainbow Tourism Group Limited after following its rights in the hospitality group’s latest capital raise as Nicholas van Hoogstraten snubbed the cash call.
NSSA is the underwriter of RTG’s $22,5 million rights issue which recorded a 56,52 percent subscription rate meaning the pension authority will pick up the balance of 43,48 percent in addition to following its rights in the group.
Before the capital call, NSSA owned 56,17 percent of the hospitality group, but will soon get another stake worth $9 782 199 which is 43,47 percent of the total rights offer.
Only 56,52 percent of the company’s shareholders subscribed to the rights issue raising $12 717 801 of the required amount.
A closer analysis of the subscription rate suggests that only NSSA which already owned 56,17 percent of the company, and a few other shareholders followed their rights.
NSSA, being a shareholder holding approximately 56,12 percent of RTG issued share capital had already indicated its intention to subscribe for the rights offer by virtue of them being underwriters to this transaction. This means more than $22 million of the capital raise will come from NSSA.
NSSA’s managing director Liz Chitiga confirmed the development saying the pension authority had followed its rights in RTG and was committed to fulfilling its underwriting role.
The results also suggest that investment vehicles representing businessman Van Hoogstraten, including Hamilton & Hamilton Trustees Ltd with a 32,08 percent shareholding, snubbed the rights offer.
Van Hoogstraten reportedly favoured liquidation to pay off NSSA debts than injecting more capital into the struggling hotelier.
But failure by Hamilton & Hamilton Trustees Ltd means it’s 32,08 percent shareholding will be wilted down to 24 percent. Shareholder squabbles at the hotelier have been blamed for the losses the group has been recording for the better part of the dollarisation era.
Ironically the capital call is meant to raise funds to pay back money that RTG owes to NSSA amounting to $13,6 million.
The combined NSSA debt inclusive of interest cost was approximately $16,4 million, taking into account further interest costs to the 31st of August 2017.
Part of the debt amounting to $16,6 million will be converted into linked debentures while the equity injection through the rights offer will ensure that the overall liabilities of the company will be reduced to the extent of $5,8 million rights offer proceeds.
Management believes the injection of $22,5 million into the company will allow management to focus on the key strategic pillars of the business.
With debt out of the way, management believes the company can now focus on its business consolidation strategies that include organic growth, cost management and leveraging on the power of information and technologies.
According to the company, “the debt restructuring transaction will improve the current working capital position leading to an improvement of the group’s current ratio.
Operations are expected to have enough cash to deal with daily operational expenditure as well as planning for future capital expenditure, such as refurbishments.