Kampala, Uganda....The Capital Markets Authority (CMA) recently approved an application by one of the listed companies, DFCU Limited for the issue of 263,157,895 additional shares in a Rights Issue within a record ten day period. The CMA client service charter indicates that a Rights Issue will be approved in 21 days. The application, which was received on 27 July 2017, was approved on 10 August 2017 by the CMA Board, giving the company approval to sell additional shares to existing shareholders at a ratio of 0.53shares for every one share held by the close of business on 24 August, 2017.
Mr. Keith Kalyegira, the CEO of CMA noted that the Authority is seeking to reduce the time taken to approve applications, whether it is for a license or an offer in order to improve efficiency in the capital markets ecosystem but emphasized that this will not in any way affect the integrity of the approval process.
"Excellence is one of our core values and for a regulator, there is no better way to display that than expediting an application", Mr. Kalyegira said.
"One of our central roles as a regulator is to approve applications of debt and equity offers as well as licenses. We have instituted mechanisms that will enable us make faster approvals for any applications that are received because our services are mainly to the private sector where efficiency is vital to decision making. However, this will not compromise the integrity of the approval process."
The DFCU rights issue, whose proceeds will largely be used to refinance a shareholder loan, confirms one of the benefits of capital markets. This is the second time a listed company is issuing shares to refinance debt. Electricity distribution company, Umeme Limited did the same in 2012 when they conducted an initial public offering to raise over $68 Million, part of which was to reduce its interest-bearing debt and be able to secure better financing options over the next few years, to help finance their capital investment programme.
Mr. Kalyegira added that this move is inline with Government's commitment to improve services, especially working through its implementing arms. He said that the Board has also been very supportive and cooperative in ensuring that the Authority becomes more efficient so that it can better serve the public and deliver on its mandate.
This development aligns with the objectives of the five-year strategic plan for the Authority, as well as the ten-year Capital Markets Development Master Plan which was launched by H. E the President in June this year. The main objectives of the Master Plan are to facilitate issuer access to alternative non-bank financing in order to reduce dependency on bank financing, improve efficiency within the capital markets ecosystem and, deepen the pool of formal savings and investment opportunities within the economy.