Money Markets
From left, TransCentury’s chairman Zephania Mbugua and top shareholders
Jimnah Mbaru and Eddy Njoroge. A letter written by Farallon Capital
Europe LLP and South Africa-based Investec Asset Management Ltd to a
select group of TransCentury’s founder shareholders proposes the means
by which the firm could settle the balance of Sh4 billion beyond the
March 25 deadline. PHGTOS | FILE
By JAINDI KISERO, jaindikisero@gmail.com
In Summary
- The creditors propose that TransCentury undertakes a rights issue whose proceeds will be used to settle the outstanding debt.
- The same bondholders will underwrite the cash call, meaning they will be in a position to assume majority control of TransCentury should its current shareholders prove incapable of paying the final balance.
- The structure of the offer underscores the plight of the firm, which some analysts said left it with little options for settling the debt without resulting in a takeover by the bondholders.
- TransCentury is valued at Sh1.6 billion, having lost 88 per cent of its value since its listing by introduction in July 2011.
Bondholders claiming Sh8 billion from investment firm TransCentury
have laid down a new set of demands that, if accepted, will see them
get Sh4 billion in cash by March 25 and gain control of the company by
2017.
A letter written by Farallon Capital Europe LLP and South
Africa-based Investec Asset Management Ltd to a select group of
TransCentury’s founder shareholders proposes the means by which the
Nairobi Securities Exchange-listed firm could settle the balance of Sh4
billion beyond the March 25 deadline.
Upon receipt of the initial sum in cash, the
bondholders want the redemption date to be extended by one year to March
2017, according to the letter sent to Eddy Njoroge, Jimnah Mbaru and
the estate of the late James Gachui — the founder chairman.
Thereafter, the creditors propose that TransCentury
undertakes a rights issue whose proceeds will be used to settle the
outstanding debt.
Under the arrangement, the same bondholders will
underwrite the cash call, meaning they will be in a position to assume
majority control of TransCentury should its current shareholders prove
incapable of paying the final balance for any reason.
Trading in the shares of TransCentury Limited and
TransCentury Mauritius Holdings, the subsidiary that issued the bond in
Mauritius, will be suspended during the cash call.
The structure of the offer underscores the plight
of the listed firm, which some analysts said left it with little options
for settling the debt without resulting in a takeover by the
bondholders.
It remains to be seen whether TransCentury will
find the Sh4 billion that the bondholders have proposed to be paid in 10
days’ time – having recently dropped a bid to raise more than Sh8
billion in a rights issue.
That leaves the company with the option of raising funds from new debt and/or equity sources.
Cede stake
TransCentury yesterday said it had entered into an
agreement with Kuramo Capital, an Africa focused investment manager, to
inject $20 million (Sh2 billion) as part of an ongoing fundraising
effort.
“This investment by the strategic investor will
complement other funding options to settle the outstanding convertible
bond and fund other infrastructure projects,” the company said in a
press statement.
This means the investment firm has to cede a sizeable stake to Kuramo in exchange for the Sh2 billion investment.
Other potential providers of such new funds are
likely to balk at the fact that TransCentury’s assets are insufficient
to cover existing claims, including those by the bondholders.
TransCentury reported net assets of about Sh3.6 billion as of June 2015, according to the latest disclosures.
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