Recapitalisation: African Alliance turns to convertible debt, asset sales

African Alliance Insurance Plc is exploring a mix of convertible debt and asset sales to strengthen its capital base as it works to meet regulatory recapitalisation requirements.

Shareholders of the insurer approved the proposed capital-raising options at an Extraordinary General Meeting held in Lagos on Wednesday.

The company’s board was authorised to raise up to N12bn through a combination of private placement, rights issue, public offer, convertible subordinated debt notes, asset sales and other structures permitted by law.

A key component of the plan is a zero-coupon convertible subordinated debt note to be issued through private placement.

Under the approved structure, the debt could subsequently be converted into ordinary shares if specified conversion events occur.

The board will determine the conversion price, ratio, triggers and other terms of the instrument, subject to approval by the relevant regulators and agreement with investors.

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The arrangement gives African Alliance an option to raise capital initially through debt while allowing the instrument to convert into equity under agreed conditions.

Shareholders also authorised the company to dispose of properties and other assets as part of the recapitalisation programme.

The insurer may also revalidate and issue unissued or legacy shares to support the capital-raising exercise.

Where those shares are insufficient to meet the requirements of the approved recapitalisation structure, the company may increase its share capital and issue additional shares to investors.

The board was given powers to appoint advisers, negotiate and execute transaction documents and complete the regulatory filings required for the exercise.

Shareholders also ratified steps already taken by the board in discussions and engagements with the National Insurance Commission, Securities and Exchange Commission and other regulatory authorities.

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