How TransCentury bond jitters put Sh5bn bank loans at stake

TransCentury board chairman Shaka Kariuki. FILE PHOTO | NMG 

By MUGAMBI MUTEGI

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Summary

• The delayed lines of credit negatively impacted operations at its engineering subsidiary, which heavily relies on funding guarantees from banks when tendering for jobs.
• TransCentury last year came under severe pressure to repay a Sh8 billion bond, but eventually closed the matter after bondholders agreed to a Sh4 billion haircut.
• This was after New York-based private equity fund Kuramo Capital paid the bondholders Sh2 billion, with the balance being rolled over into a new three-year loan.

Investment firm TransCentury has disclosed that bad publicity last year put at stake over Sh5 billion in loans from commercial banks following uncertainties about the investment firm’s ability to settle a multi-billion shilling corporate bond.

The delayed lines of credit negatively impacted operations at its engineering subsidiary, which heavily relies on funding guarantees from banks when tendering for jobs.

“The perceived uncertainty on the group’s capability to repay the convertible bond, and the increased negative publicity around this matter, created a reactionary credit freeze from our lenders,” TransCentury said in a statement.

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“This strained the working capital lines for the operating companies.”

TransCentury last year came under severe pressure to repay a Sh8 billion bond, but eventually closed the matter after bondholders agreed to a Sh4 billion haircut.

This was after New York-based private equity fund Kuramo Capital paid the bondholders Sh2 billion, with the balance being rolled over into a new three-year loan.

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Kuramo now owns 25 per cent of TransCentury, has several director positions on the firm’s board and has veto powers on key decisions that affected the hiring of the firm’s CEO and investment decisions.

The credit freeze affected operations at its engineering and construction unit — Civicon.

“There is a requirement to put bid and performance guarantees when bidding and executing projects and these are guaranteed by banks. The credit delays created a challenge,” TransCentury told the Business Daily.

“However, the engineering division made remarkable progress in the latter part of 2016 in turning the tide and closing with an impressive contracted order book that is in excess of Sh 12 billion and whose execution is in progress.”