LISTED agro-industrial concern, Interfresh is seeking shareholder approval to raise $3 million through a rights offer, as part of plans to recapitalise and retire short-term borrowings.
REPORT BY GAMMA MUDARIKIRI
In an abridged circular sent to shareholders yesterday, Interfresh said it was seeking approval to consolidate the authorisation and issue of ordinary shares by a factor of 10.
The company said if the deal is approved by shareholders at an extraordinary general meeting (EGM) scheduled for July 22, it will reduce authorisation and issue of shares by a tenth to 60 million and 48,7 million from 600 million and 487 million, respectively.
“Subject to shareholder approval by members at the EGM, members of the board of directors wish to raise $3 million through a rights offer,” part of the statement reads.
A right offer involves the issue of rights to a company’s existing shareholders that entitles them to buy additional shares directly from the entity in proportion to their existing holdings, within a fixed period.
The company said 150 million new ordinary shares will be offered to existing shareholders for subscription at a cash price of $0,02 each, payable in full acceptance on the basis of 3,08 for every single ordinary share.
According to the company, the shareholder consolidation is intended to rationalise the number of authorised and issued shares to create sufficient headroom for issuing new ordinary shares for the proposed recapitalisation plan.
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Since dollarisation in 2009, Interfresh has not had any capital injection and instead has been relying on debt to finance its operations.
The company said the cost of short-term debt was high and unsustainable.
Interfresh secured a $5 million loan in May 2011 to fund capital projects and had to dispose its Graniteside complex to retire short-term debt and provide working capital relief.
However, in 2012 the company had severe working capital constraints and secured another $1,25 million short-term bridging loan from Icejay Investments (Pvt) Limited.
Interfresh early this year warned of a 30% slump in revenue after the government acquired a 1 600ha portion of its citrus estate, blighting the company’s hopes of returning to profitability.
The company said the consequent revenue and asset impairment had left the balance sheet in need of restructuring through increased equity funding.
The issue and allotment of new shares in pursuance of the proposed rights offer is expected to raise equity capital to retire bridging short-term debts and finance working capital requirements, while it will also allow for the restructuring of the balance sheet by reducing debt.
Disapproval of the transaction by shareholders will mean that the company will fail to fund its operations.
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