EOH Holdings has been given the go-ahead to proceed with a planned rights offer aimed at reducing the JSE-listed IT services company’s debt.

At an extraordinary general meeting on Tuesday, shareholders voted overwhelmingly in favour of proceeding with the rights issue. Specifically, shareholders approved:

The ability of the EOH board to issue new shares as needed to implement the planned rights offer as well as a specific issue of shares to empowerment partner Lebashe Investment Group.
A proposed increase in the company’s authorised but unissued share capital by a further seven billion shares to reach an aggregate of 7.5 billion authorised shares.
Placing the authorised but unissued shares under the control of the directors solely for the purposes of implementing the rights offer.
A specific issue of shares for cash to a subsidiary of Lebashe.

EOH first announced the rights issue plan in October, saying it was looking to raise up to R500-million plus a further R100-million in an empowerment deal with Lebashe.

The company’s legacy debt issues have continued to weigh heavily on investor sentiment, and management sees the rights issue as a firm way of dealing them.

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“With the turnaround of EOH’s compliance, governance and risk management largely complete, and in the context of the significant improvement in EOH’s financial performance, the board considers it appropriate to focus on optimising EOH’s capital structure and positioning the company for future growth by proceeding with an equity capital raise of up to R600-million,” it told shareholders in a statement on 11 November.

The net proceeds will be used to:

Repay R563-million of EOH’s bridge debt facility (of which R728-million is currently outstanding) and “right-size the capital structure”. The remaining balance of the bridge facility will be repaid from the proceeds of smaller asset disposals as well as a refinancing of the balance with one or more of the company’s lenders.
Optimise the balance sheet.
Maintain sufficient working capital in the short to medium term to allow the company to pursue its growth strategy.

“In the opinion of the management team and board, right-sizing the capital structure will allow EOH to improve earnings and ultimately create value for shareholders,” EOH said in the November statement.

EOH CEO Stephen van Coller told TechCentral on Wednesday that the company will publish a circular regarding the rights offer to shareholders by mid-January. Shareholders will then have the opportunity to elect to follow their rights or not. – © 2022 NewsCentral Media