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.
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