Orascom to boost balance sheet with US$800m rights issue
Funds to cover cash shortfall as Egyptian telco prepares to fight $597m tax bill from Algerian authorities
Orascom Telecom's shareholders have given the go ahead to an US$800 million rights issue to boost the Egyptian telco's balance sheet, as it sets about resolving a tax dispute with Algeria's financial authorities relating to one its key subsidiaries, Djezzy.
Orascom said it would pay 20% of the US$597 million that Algeria's tax authorities claim the firm owes in back taxes and penalties as a legal step that will allow it to appeal against the ruling, spokeswoman Manal Abdel Hamid told Reuters.
The proceeds of the rights issue would be used to cover any shortfall in cash following the back taxes and penalties ruling, but the funds for the 20% payment of approximately $119 million will come from Djezzy's cash balances and not from the capital increase, Hamid said.
"It is a prerequisite to discuss the rest. It is possible for the entire 20% to be refunded in full," she told the newswire.
With just under 15 million of the group's 89 million subscribers Djezzy is one of Orascom's key operations and is responsible for some 50% of Orascom's cashflow, but conditions in Algeria are making it increasingly difficult for the operator to do business there, according to Orascom's management team.
In a conference call with analysts and investors last month, Orascom executive chairman Naguib Sawiris described the tax claims as "completely unfounded".
He said: "Unfortunately, the Algeria we entered is not the Algeria of today. We entered an Algeria where they were welcoming investment. They were very pro foreign direct investment and they never went back on their words or amendments, but today it's a completely different scenario."
Orascom is expected to launch its appeal against the tax claims shortly.