MTN Zakhele Futhi is again in discussions with MTN to avert a liquidity crunch after the mobile phone company scrapped its full-year dividend for the year to end-December 2020.
MTN’s Zakhele Futhi is a ring-fenced special purpose vehicle aimed at facilitating investment by previously disadvantaged South Africans in MTN Group (MTN).
MTN on Thursday suspended its final dividend as it focuses on faster debt reduction at its holding company even after posting a surge in 2020 earnings.
MTN said anticipates paying a total ordinary dividend of at least 260cps for the 2021 financial year.
“We anticipate that this will be a final dividend, with no interim dividend for FY 2021. On assessment of the progress of cash upstreaming from Nigeria, ARP delivery and COVID-19 impacts, the Board will consider returning further cash to shareholders in the form of special dividends or share repurchases after the release of FY 2021 results.”
“The fact that MTN has suspended the 2020 final dividend (and considering the dividend guidance provided for 2021) impacts MTN Zakhe Futhi’s liquidity, solvency and its ability to pay scheduled preference dividends,” the company said on Friday.
The company said it “is entering into discussions with MTN and the preference share funders to find solutions to mitigate the impact.”
The full impact is still being determined and this may have a material effect on the price of its ordinary shares, the company said.
Last August, the company entered into talks with MTN to avert liquidity issues.
The liquidity of MTN Zakhele Futhi has been impacted by MTN’s decision not to declare a dividend in its financial results for the six months ended 30 June 2020.
The decision by MTN Group would affect its ability to pay expected preference dividends.
The scheme, which is listed on the JSE, has entered discussions with MTN and the preference share funders to find solutions to mitigate the impact.
Preference shares were subscribed for by third-party debt providers on MTN Zakhele Futhi’s establishment, and dividends are treated as an interest expense.
It holds about 77 million shares in MTN, amounting to 4% of MTN’s issued share capital.
It also has about 89 000 shareholders holding 123.4 million MTN’s Zakhele-Futhi ordinary shares.