TransCentury lines up right issue to pay Sh7.5bn Eurobond

Corporate News

TranCentury CEO Gachao Kiuna reviewing the ongoing construction works at the GZ Industries Aluminium Cans Factory near Emali. TransCentury is planning a rights issue. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• The rights issue will see shareholders pump in nearly double the company’s current market capitalisation of Sh4.5 billion, with those sitting out the rights issue facing significant dilution.
• TransCentury is expected to publish details of the rights issue, including the expected gross proceeds and pricing of the new shares, in the coming months.

Investment firm TransCentury is set to launch a rights issue whose proceeds will be used to repay $80 million (Sh7.5 billion) convertible Eurobond it issued in 2011.

The decision, communicated to investment analysts, is aimed at boosting the company’s cash position.

The cash call will see shareholders pump in nearly double the company’s current market capitalisation of Sh4.5 billion, with those sitting out the rights issue facing significant dilution.

“TransCentury will undertake a rights issue before end of 2015 to finance the repayment of the outstanding 2011 bond … of approximately $80 million,” said Standard Investment Bank (SIB) in a note to investors.

The company confirmed the rights issue plans.

SIB noted that debt conversion into equity is unlikely because of TransCentury’s depressed stock price and the current weakening of the shilling against the dollar.

The bond conversion is set at between Sh40 and Sh49.6, but the stock price has dropped to lows of Sh16.1 or a third of its listing price of Sh50.
The exchange rate is also fixed at Sh80.49 to the dollar, but this has deteriorated to the current average of Sh94.

It is these major deviations in the two factors that has seen the firm opt for the rights issue ahead of the bond’s maturity on March 25, 2016.

READ: TransCentury announces first ever loss as RVR stake sale hits earnings

The bond has an annual interest rate of six per cent besides an additional six per cent to be paid at the end of its life for investors who will not have converted their portion into shares.

Only a small portion of the debt was converted into shares amounting to 6.9 million units in 2011, with the investment firm having set aside a total of 150.9 million shares to accommodate a potential full conversion.

Conversion of the debt into equity would have eased pressure on TransCentury which has little cash on hand.

The firm ended 2014 with a negative cash flow of Sh454.7 million, with most of its assets held in the form of property, equipment and receivables.

TransCentury is expected to publish details of the rights issue, including the expected gross proceeds and pricing of the new shares, in the coming months.

Part of the money raised from the cash call, together with an undisclosed new borrowing, will be used to finance energy and road projects among others.