Corporate News
TransCentury chairman Zeph Mbugua. The firm says the minority bondholders agreed to slash their principal. PHOTO | FILE
By VICTOR JUMA, vjuma@ke.nationmedia.com
In Summary
- TransCentury on Monday said in a notice that the minority bondholders had agreed to slash their principal from $1 million (Sh101 million) to $703,792 (Sh71 million).
- The firm added that the creditors paid a hefty premium to the current stock and foreign exchange markets in converting the reduced debt into ordinary shares of the company.
A section of TransCentury’s
bondholders have signed a deal with the company that has left them at a
95 per cent loss on their original $1 million (Sh101 million)
investment in the company.
The loss, equivalent to Sh95.3 million, excludes the loss of
interest income amounting to ShSh42.2 million which would have accrued
to them as per the original terms of the bond.
The Nairobi Securities Exchange-listed firm Monday
said in a notice that the minority bondholders had agreed to slash their
principal from $1 million (Sh101 million) to $703,792 (Sh71 million).
TransCentury added that the creditors paid a hefty
premium to the current stock and foreign exchange markets in converting
the reduced debt into ordinary shares of the company.
They exchanged the $703,792 at a rate of 80.49 units to the dollar, equivalent to Sh56.6 million.
Based on the current forex rates of 101 units of
the Kenya shilling to the greenback, the investors would have converted
the same dollars to Sh71 million.
The bondholders further acquired 1.1 million shares
of TransCentury at a price of Sh49.6, representing an 882.1 per cent
premium on the firm’s current market price of Sh5.05 per share.
This values their residual investment at Sh5.7 million, representing a 95 per cent haircut on the original principal.
The same Sh56.6 million would have fetched them
11.2 million shares worth Sh56.6 million based on the current market
prices. An upturn in the investment company’s share price could however
benefit the shareholders in the long run.
The bondholders effectively stuck to the original
terms of the five-year bond and even reduced their claim despite the
deterioration of the company’s share price and its inability to pay
interest and principal in cash.
TransCentury entered the NSE at an offer price of
Sh50 but the stock traded at Sh5.05 Monday, representing an 89.9 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 Sh49.6 in the fifth and
final year.
The weakening of the shilling and TransCentury’s
share price erosion scuttled the conversion window that closed in
December last year, having been set at up to 90 days before the March
25, 2016 maturity date.
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