Recapitalisation: African Alliance turns to convertible debt, asset sales

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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.

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

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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.

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

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

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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.

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

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

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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.

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

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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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