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Recapitalisation: Operators consider capital injection, merger to meet deadline

By on May 10, 2016

Capital market operators (CMOs), who missed the September 30, 2015 deadline for recapitalisation are now intensifying efforts to meet the new December 31, 2016 date given by the Securities Exchange Commission (SEC). THISDAY checks revealed that the CMOs are wooing investors for fresh capital injection or considering merger options.

SEC had on December 19, 2013, issued a new capital requirement for the operators with December 31, 2014 as deadline. However, the deadline was extended to September 30, 2015, following pressure and protests by stockbrokers and other CMOs.

At the expiration of the deadline, SEC released a list of 429 CMOs that complied with new minimum capital requirements. About 24 CMOs were disqualified for non-compliance or inability to substantiate claims of compliance by the audit firms.

However, the Director General of SEC, Mounir Gwarzo, last April, announced a 15-month grace period, for the CMOs to recapitalise.

He explained that the operators who were disqualified for non-compliance or inability to substantiate their claims of compliance by the audit firms would be allowed to come back to the market once they show evidence of compliance within the stipulated period.

“We have given a grace of about 15 months from the initial deadline of September 30, 2015 to December 31, 2016. Operators who did not meet the requirement within this period will have their operating license cancelled,” Gwarzo said.

Seven months to the deadline, THISDAY checks revealed that some of the affected operators are wooing investors to inject funds and become part owners.

“We are talking to new investors who can bring in some funds so that they can be part owners since the state of the market is not helping us in making so much money. Unfortunately, some investors who are willing to bring in funds are being discouraged by the continued bearish nature of the market. But if we fail to attract investors, we may end up merging with other operators,” an official of one of the affected companies said at the weekend.

Announcing the 429 CMOs that met the September 2015 deadline, SEC had said 16 were new CMOs.

“Out of the 16 CMOs, 10 were newly-registered companies, while the other six filed evidences of compliance after the release of provisional list, which were verified and accepted. The list is based on the consideration of the reports on capital verification and the responses received from the affected Capital Market Operators,” the commission had said.

SEC had in December 2013 announced major increases in minimum capital requirements for capital market functions.

Minimum capital base for broker/dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, was increased from N40 million, to N200 million, representing an increase of 400 per cent, while minimum capital base for dealer was increased by 233 per cent from N30 million to N100 million.

Also, issuing houses, which facilitate new issues in the primary market, were required to have minimum capital base of N200 million, from N150 million. The capital requirement for underwriters also doubled from N100 million to N200 million.

 

[ThisDay]