Omega Ukama 
RAINBOW Tourism Group (RTG) this week announced an early redemption of its seven-year debenture due to a now “sub-optimal” security arrangement.
Tendai Madziwanyika, the Rainbow Tourism Group chief executive
Issued in 2018, the $16,7 million debt notes were secured by a bond over the company’s three hotels ― Bulawayo Rainbow Hotel, A’Zambezi River Lodge and Victoria Falls Rainbow Hotel.
“The combined value of the three properties relative to the value of the debentures have rendered the financing arrangement sub-optimal. Evidently, continued securitisation of the company’s properties against the ZW$ debentures now shows an inefficient way of utilising the company’s assets,” RTG said in a notice.
“Redeeming all the debentures will allow your company flexibility and an opportunity to explore optimal funding alternatives for growth.
“The company hereby advises debenture holders that the board has resolved to redeem in full the 16 687 500 debentures issued during January 2018 capital raise,” the company said.
Further, the company says it believes that full redemption will allow debenture holders an opportunity to “redeploy their funds into other investment instruments likely to yield returns commensurate with the now obtaining environment”.
The debentures, which have been trading on the Zimbabwe Stock Exchange, were issued with a bi-annual coupon of six percent. Zimbabwe’s inflation, which at the time was around three percent, has since risen to 786 percent as of May this year.
The proceeds of the debenture issue were used to repay the then overdue Nssa loan, which the company had struggled with for close to a decade.
The capital raised from the issue brought the company’s gearing ratio down from an alarming 70 percent to 35 percent, and put it in a good position to restructure its then debt laden balance sheet.
Thanks to the capital mobilisation in 2018, which also included $6 million in rights issue shares, the group reduced its indebtedness from $42 million in 2012, to about $22 million in 2019.
Investors in the debentures, however, like many lenders in the economy, are stuck with the short end of the stick. They will be repaid at par, in Zimbabwean dollars, which now trade at a considerable discount to the greenback, despite the fact that the instruments were denominated in US dollars at issue.
In February of 2019, the government re-introduced the Zimbabwean dollar and gazetted a law prescribing the conversion of balances for assets and liabilities from US dollars to the domestic currency on a 1:1 basis, for prior transactions.
