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Citadel Capital finalises rights issue, still wary of the future

Citadel Capital may have just finalised a fully subscribed $175.6 million rights issue but the firm still foresees tough times ahead.
Qalaa Holdings | 30.10.2011

“We see a further 12-18 months of turbulence ahead, a fact that sees us continue to manage costs at the platform and portfolio levels,” the firm’s founder and chairman, Ahmed Heikal noted in a statement announcing the finalisation of the rights issue that resulted in a capital increase, injecting $120 million into its balance sheet.

However, Mr Heikal, whose Cairo-headquartered private equity firm is focused on Africa and the Middle East, has a positive outlook on how these current crisis will eventually turn out.

“That said, we are optimistic: Our investments are firmly on the right side of macroeconomic trends, and we remain resolute in our belief that greater democracy in key nations across our footprint will only enhance the outstanding macroeconomic fundamentals that short-term investors are presently discounting,” he added in the statement.

Since the beginning of the year, the Middle East and North Africa have been rocked by political uprisings that have seen changes of regimes in several countries, including the firm’s Egypt base.

In spite of all this tension, Citadel Capital has been concentrating on building its balance sheet. According to the statement, besides the rights issue, the firm and its platform companies have raised a further $319.3 million in equity and debt since January 2011.

“This is the first of several steps that we expect will add an additional $200 million to our war chest by the end of the year, putting Citadel Capital in a robust financial position heading into 2012,” Mr Heikal stated.

From the rights issue, it emerged that the African private equity landscape is yet to diversify its sources of funds, a trend that other emerging markets like China have excelled in.

International investors were important participants in the Citadel Capital rights issue, subscribing to 210 million new shares (including 52.5 million preferred shares) at a par value of EGP $5 each.

In the eyes of the firm though, this is an important endorsement of Citadel Capital’s long-term fundamentals, as it indicated in a statement announcing the completion of the rights issue.

“The successful close of our capital increase despite challenging global and local market conditions is ringing endorsement from key shareholders of Citadel Capital’s long-term fundamentals,” noted Mr Heikal.

Citadel Capital, listed on the Egyptian Stock Exchange, now reports capital of $729 million distributed across 871,625,000 shares, including 217,906,250 preferred shares and 653,718,750 common shares.

Among the institutions that have taken part in Citadel Capital transactions this year are Equity Bank of Kenya, International Finance Corporation, the African Development Bank, IFC African, Latin American and Caribbean Fund ALAC.