Thursday, March 24, 2016

TransCentury shareholders face uncertainty after Sh8bn bond deal settlement

TransCentury chairman Zeph Mbugua. Kuramo Capital will be allotted an undisclosed stake in the investment firm. PHOTO | FILE
TransCentury chairman Zeph Mbugua. Kuramo Capital will be allotted an undisclosed stake in the investment firm. PHOTO | FILE 
By VICTOR JUMA, vjuma@ke.nationmedia.com
In Summary
  • TransCentury says it has reached a settlement with the majority of the convertible bondholders that reduces the debt from Sh8 billion to Sh4 billion.
  • The company did not say whether the creditors were offered shares and other collateral for them to reduce their claim or if it amounted to outright partial debt forgiveness.

Shareholders of TransCentury face uncertainty over the future of their investment after the company announced it has struck a deal to settle a Sh8 billion bond without divulging important details.
The Nairobi Securities Exchange-listed firm Thursday said it has reached a settlement with the majority of the convertible bondholders that reduces the debt from Sh8 billion to Sh4 billion.
The company did not say whether the creditors were offered shares and other collateral for them to reduce their claim or if it amounted to outright partial debt forgiveness.
Analysts at Standard Investment Bank (SIB) said the announcement suggests the bondholders took a Sh4 billion haircut that would leave them in a major loss, having lent TransCentury $75 million (equivalent to Sh6 billion at the exchange rates in June 2011 when the bond was issued).
Of the Sh4 billion due to creditors, effective today (Friday), TransCentury has so far raised Sh2 billion from Kuramo Capital which will be allotted an undisclosed stake in the investment firm.
Shareholders of TransCentury, especially minority investors, are therefore in the dark as far as the extent to which the company has settled the debt and its full impact on the firm.
The company has not yet called an extraordinary general meeting to ratify the material decisions, implying that it may do so later or that directors are empowered to act on behalf of all shareholders.  
The investors are however set to undergo significant dilution from the entry of Kuramo and it remains to be seen whether TransCentury will raise the remaining Sh2 billion by further issuing new shares or taking more debt.
The company is currently valued at Sh1.5 billion on the Nairobi bourse, indicating that providers of the aggregate Sh4 billion required will take a majority stake. 
TransCentury entered the NSE at an offer price of Sh50 but the share price has dropped to the current range of Sh5.3, representing an 89 per cent decline. The price collapse is part of the reasons the bondholders could not convert their units into shares.
The conversion terms were fixed at an exchange rate of 80.4 units of the shilling to the dollar while the share price was on a glide path that terminated at a high of Sh49.60 in the fifth and final year.
TransCentury also noted that there are still some holdouts among the bondholders who are pressing for compensation on the original terms, meaning cash payments inclusive of accrued interest after the equity conversion window closed.
The five-year bond accrued an annual interest of six per cent while a further six per cent premium is to be paid on the units held to maturity.
This means that the typical bondholder will get a minimum payout representing 133.8 per cent of original investment. It remains to be seen what impact the bond settlement will have on TransCentury’s performance in the coming years.

No comments :

Post a Comment