Microfinance enterprise, Untu Capital’s $5 million bond is at risk after the African Guarantee Fund (AGF) placed on hold the cover it was providing for the bond after the former failed to pay guarantee fees.

Untu Capital issued the bond in late 2017 after the local micro-finance institution failed to remit guarantee fees.

The AGF assists financial institutions to increase their financing to African Small and Medium Sized Enterprises (SMEs) through the provision of partial financial guarantees and capacity development assistance.

AGF had provided a 50 percent guarantee for Untu’s bond in which the firm raised capital through a series of issues, which had maturity periods ranging from 12 months to 36 months at an interest rate of nine percent per annum.

“Note-holders of the Untu Capital Limited’s notes….are hereby notified of the suspension of the African Guarantee Fund guarantee,” Untu said in a statement.

“AGF have cited the current economic environment in the country and failure by the company to remit their guarantee fees out of the country.”

The suspension exposes all those who subscribed to the bonds in an event Untu fails to meet its end of the bargain at their maturity.

Untu Capital said I had failed to secure foreign currency allocations to remit the guarantee fees.”

The MFI said it will continue to engage the Reserve Bank of Zimbabwe, through its bankers, for an allocation of foreign currency for the amounts due on the AGF Guarantee, which was not disclosed.

Untu said it was also working with the trustee of the bonds – ZB Bank – and planned to increase the security offered.

ZB Bank was holding properties worth $2.5 million as security for the other 50 percent of the $5 million bond.

The Untu bond was debt instrument that allowed interested individuals to subscribe to it using mobile phones, for a minimum of $50 per subscription.

The initial tranche, to raise $1 million was over-subscribed by 72.5 percent.