Mpico closes rights issue, raises K9 billion

Post was last updated: November 21, 2016

Malawi Stock Exchange listed property firm, Mpico, has closed its rights issue raising K9 billion in revenue following a subscription of 82 percent by existing shareholders and the investing public.

The rights issue opened on October 17 and involved 1,149,023,730 ordinary shares at a subscription price of K7.83 per share.

In a statement issued towards the end of last week, Mpico said out of the rights offered, existing shareholders and the investing public took up 82 percent of the rights, with the remaining 18 percent allocated to underwriters.

A rights issue is a way in which a company sells new shares in order to raise capital. Shares are offered to existing shareholders in proportion to their current shareholding.

The price at which the shares are offered is usually at a discount to the current share price, which gives investors an incentive to buy the new shares — if they do not, the value of their holding is diluted.

The new Mpico shares will be listed on the Malawi Stock Exchange today and new share certificates issued and posted to shareholders by the Transfer Secretaries, National Bank of Malawi Limited through the Financial Management Services Department.

Mpico Managing Director, Damian Kafoteka, told an investors’ meeting early this month that the rights issue is aimed at improving the overall liquidity of the business, de-risk it and propel growth opportunities.

Kafoteka said after reviewing various options, following an assessment by EY, the Mpico board decided to proceed with the right issue to address the liquidity challenges and related interest burden.

Kafoteka said Mpico has liquidity issues as a result of delays in obtaining contractual lease payments from Malawi Government amounting to over K4 billion, coupled with over-extension of the Gateway Mall development project.

He said the company opted to take the promissory note option being offered by government as a way of squaring the debt. He, however, conceded that this has come about because of over-reliance on government business.

“There is significant exposure to government as a tenant. Therefore, the company is aiming to de-risk the property portfolio of its exposure to its one major tenant. This has commenced and will be done over a period of 18 months.

“The intention is to reduce the level to 10 percent from its peak at 51 percent. Rental income will at the same time be managed to ensure that the current levels are maintained,”

The K4 billion forms part of the arrears government owes the private sector.

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