Sovereign Trust Insurance Plc has launched a process to raise N2.085 billion through rights issue as the company seeks to beef up its capital base to position it in better stead for large-ticket transactions.
The company through Dynamic Portfolio Limited, its stockbrokers, plans to raise N2.085 billion by way of rights to existing shareholders. The company, according to a notice by the Nigerian Stock Exchange (NSE), has applied approval to issue and list 4.17 billion ordinary shares of 50 kobo each, per share.
The notice said that although no opening and closing dates have been announced for the proposed rights issue, it will however be on the basis of one new share for every two held by shareholders as at the January 15, 2019, qualification date.
Shareholders of Sovereign Trust had recently approved a new capital raising plan for the insurance company, on the heels of the cancelled tier-based minimum solvency capital policy proposed by the National Insurance Commission (NAICOM).
Shareholders authorised the board of the company to create five billion new ordinary shares of 50 kobo each to increase its authorised share capital to N10 billion of 20 billion ordinary shares of 50 kobo each. Shareholders also approved the proposal to raise additional equity capital for the company up to the maximum of the authorised share capital with additional mandate to the board to absorb excess money in the event of oversubscription of the initial offer.
Under its capital raising plan, Sovereign Trust could raise funds by issuing new shares to existing shareholders, new general retail investors, existing and new strategic investors or a combination of many means of capital raising.
While NAICOM has cancelled the new tier-based capitalisation programme, market analysts believed that many insurance companies that had launched emergency capital raising plans may go ahead with their plans as proactive measures. Many analysts expected a considerable consolidation of the Nigerian insurance sector, with capitalisation as a major benchmark.
Shares of Sovereign Trust suffered a 58 per cent decline in 2018, sliding from 50 kobo to 21 kobo per share.