By Staff Writer
HARARE – OLD Mutual Zimbabwe is asking shareholders to approve a balance sheet overhaul that would convert US$84.3 million in long-standing foreign currency obligations into preference shares, as the insurer moves to resolve liabilities tied to the country’s blocked funds regime and a decade-old indigenisation deal.
The proposed transaction, outlined in a circular to shareholders ahead of a general meeting, would see the group issue 84,315,136 non-convertible, redeemable and non-cumulative preference shares valued at $84.3 million to companies within the wider Old Mutual group in full settlement of the debt.
The restructuring is one of the most significant attempts by a Zimbabwean financial services firm to address legacy foreign currency obligations arising from the country’s currency reforms and exchange control measures.
Old Mutual Zimbabwe said the move would permanently extinguish the debt, strengthen its solvency and reduce exposure to exchange rate volatility that has weighed on its balance sheet for years.
“The proposed transaction will settle the OMZIL legacy debt in full and permanently,” the company said in the circular.
The liabilities stem from three separate obligations, including US$50 million owed to Old Mutual Financial Limited from guarantees issued during the 2012 indigenisation transaction, US$32.06 million in unpaid dividends due to Old Mutual Zimbabwe Holdings Limited, and US$2.25 million in service fees owed to Old Mutual Africa Holdings Proprietary Limited.
The debt became increasingly problematic after Zimbabwe reintroduced the local currency in February 2019, the insurer said. Under the monetary reforms, foreign currency-denominated bank balances were converted into local currency at a legislated rate of US$1:ZWL1, while offshore obligations remained in U.S. dollars.
Old Mutual Zimbabwe registered the obligations with the Reserve Bank of Zimbabwe under the blocked funds settlement framework in 2020 and deposited the required ZWL84 million.
The government later enacted Finance Act No. 7 of 2021, allowing the state to assume blocked funds liabilities. However, the insurer said the debt has neither been settled by authorities nor repatriated to creditors.
“Since then, neither been repatriated nor settled by OMZIL or by the RBZ/Government of Zimbabwe in terms of the Blocked Funds framework and therefore remains owing to the OM Creditors,” the company said.
Under the proposed restructuring, the debt would be converted into equity through the issuance of preference shares rather than cash payments.
“The issue of the OMZIL C Preference Shares to the OM Creditors in full, final and complete settlement of the OMZIL legacy debt will eliminate the negative impact of the debt on OMZIL’s solvency and removes the currency mismatch by creating an equity instrument,” the company said.
The preference shares will carry variable coupon dividends linked to distributable profits and will rank ahead of ordinary shares for dividend payments and capital distribution in the event of liquidation, but will not carry ordinary voting rights except on matters directly affecting preference shareholders.
Old Mutual Zimbabwe said the structure preserves liquidity by allowing redemption over time at the company’s discretion.
Financial projections show total equity rising to US$388.2 million from US$303.8 million, while total liabilities fall to US$15.5 million from US$99.3 million.
The company said the transaction would not alter control of the business or dilute existing ordinary shareholders.
“There will be no change to the number of authorised or issued ordinary shares in OMZIL’s share capital,” it said.
The preference shares may eventually be listed on the Victoria Falls Stock Exchange or another approved exchange, subject to regulatory approvals.
The transaction qualifies as a related-party deal because the creditors are members of the broader Old Mutual group.
Risks include continued macroeconomic instability, foreign currency volatility, and uncertainty around the blocked funds compensation framework.
The company also warned that preference shareholders would receive dividend priority ahead of ordinary shareholders, potentially reducing distributable earnings for ordinary investors.
“The proposal preserves shareholder value and improves OMZIL’s capital structure without immediate cash outflow or liquidity burden on OMZIL,” the company said.
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