eBusiness Weekly
HARARE – The African Guarantee Fund (AGF) has put on hold the cover it was providing for a $5 million bond issued by Untu Capital in late 2017 after the local micro-finance institution failed to remit guarantee fees.
Launched in 2012 by the African Development Bank and some partners, the AGF assists financial institutions to increase their financing to African Small and Medium Sized Enterprises (SMEs) through the provision of partial financial guarantees and capacity development assistance.
AGF had provided a 50 percent guarantee for Untu’s bond in which the firm raised capital through a series of issues, which had maturity periods ranging from 12 months to 36 months at an interest rate of nine percent per annum.
And with Zimbabwe facing crippling foreign currency shortages, Untu said on Tuesday it had failed to pay guarantee fees leading to suspension of the cover by the AGF.
“Note-holders of the Untu Capital Limited’s notes….are hereby notified of the suspension of the African Guarantee Fund guarantee,” Untu said in a cautionary.
“AGF have cited the current economic environment in the country and failure by the company to remit their guarantee fees out of the country.”
The suspension exposes all those who subscribed to the bonds in an event Untu fails to meet its end of the bargain at their maturity.
Untu confirmed it had “so far failed to secure foreign currency allocations to remit the Guarantee Fees.”
The MFI said it will continue to engage the Reserve Bank of Zimbabwe, through its bankers, for an allocation of foreign currency for the amounts due on the AGF Guarantee, which was not disclosed.
Forex shortages have seen the country’s central bank rationing allocations to critical sectors of the economy.
Untu said it was also working with the trustee of the bonds – ZB Bank – and planned to increase the security offered.
ZB Bank was holding properties worth $2.5 million as security for the other 50 percent of the $5 million bond.
The Untu bond, which was known as U-Gain, was a pace setting debt instrument that allowed interested individuals to subscribe to it using mobile phones, for a minimum of $50 per subscription.
The initial tranche, to raise $1 million was over-subscribed by 72.5 percent.
At issuance, Untu Capital said monies that would be raised would be used to fund its operations as well as for on-lending to productive sectors of the economy.
The firm said listing of the bond the securities exchange allowed investors to trade and potentially make profits from the investment depending on the going price. – New Ziana
