TransCentury gets six months to clear Sh4bn bond debt

TransCentury chairman Zeph Mbugua. PHOTO | FILE 

By BRIAN NGUGI, bnjoroge@ke.nationmedia.com

In Summary

• TransCentury said last week it had reached an agreement with the majority of its bondholders on the settlement of the bond which matured on March 25 and that the deal included reducing the debt to $40 million (Sh4 billion).

TransCentury bondholders have now given the troubled investment firm an additional six months to repay the outstanding half of its $80 million (Sh8.1 billion) convertible debt under an agreement reached this month.

The Nairobi-bourse listed firm said last week it had reached an agreement with the majority of its bondholders on the settlement of the bond which matured on March 25 and that the deal included reducing the debt to $40 million (Sh4 billion).

“We have up to six months extension to pay the debt from the March 25 date but we are optimistic of clearing it earlier before the new due date,” acting chief executive Ng’ang’a Njiinu told the Business Daily in an interview at his office.

TransCentury entered an agreement with Kuramo Capital this month to inject $20 million (Sh2 billion) of fresh capital into the company for an undisclosed stake and use the cash together with other sources to settle the outstanding bond.

Mr Njiinu declined to disclose the terms that led the bondholder to cut the debt by half. 

“They are happy to get $40 million and that’s it. It will be a full and final settlement. It is good for our shareholders,” he added while terming the deal a big win for its shareholders.

However, a letter written by the bond holders Farallon Capital Europe LLP and South Africa-based Investec Asset Management Ltd to a select group of TransCentury’s founder shareholders had earlier proposed the means by which the investments firm could settle the balance of Sh4 billion beyond the March 25 deadline.

READ: TransCentury reaches settlement with bondholders

According to the letter, earlier seen by the Business Daily, upon receipt of the initial sum in cash, the bondholders had suggested that the redemption date be extended by one year to March 2017.

Thereafter, the creditors had proposed that TransCentury undertakes a rights issue whose proceeds would be used to settle the outstanding debt according to the letter sent to Eddy Njoroge, Jimnah Mbaru and the estate of the late James Gachui — the founder chairman.

Under the arrangement, the same bondholders would underwrite the cash call, meaning they would be in a position to assume majority control of TransCentury should its current shareholders prove incapable of paying the final balance for any reason.

Shares in the company, founded as an investment club by a group of wealthy Kenyans in 1997, hit a one-year low and has shed 61 per cent over the past six months as investors fretted about its ability to clear the debt.

Its share closed trading at Sh5.20 at the Nairobi bourse Tuesday. The stock was introduced at the bourse in 2011 at Sh50 each.