TransCentury bond holders suffer 95pc loss in new deal
TransCentury chairman Zeph Mbugua. The firm says the minority bondholders agreed to slash their principal. PHOTO | FILE
What you need to know:
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.
The bond, which TransCentury issued in June 2011 in Mauritius, accrued an annual interest of six per cent and a further six per cent premium was to be paid on the units held to maturity.
This means that the typical bondholder was to get a minimum payout representing 142 per cent of original investment, a level that would have seen the minority creditors get a total of Sh143.2 million if things had gone according to the original plan.
The deal with the minority bondholders is part of TransCentury’s move to resolve the Sh6 billion debt excluding interest and forex losses. The company is issuing new shares to some of the creditors and raising new funds to pay off others in cash.
The firm is expecting a Sh2 billion cash injection in September from asset manager Kuramo Capital that will be given an undisclosed number of shares in the company.
“TransCentury shareholders will be diluted by at least 65 per cent (by our estimates), following the entry of Kuramo into the business,” Standard Investment Bank (SIB) said in a statement.
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