Lagos-based Africa Finance Corporation (AFC) has received a Sh1.4 billion payout from #ticker:ARM Cement in a deal that saw it forego its rights to convert a Sh5.1 billion loan into 78.1 million shares of the cement manufacturer.
ARM took the six-year convertible debt in 2012, offering AFC an annual interest of five per cent payable quarterly plus 2.5 per cent interest accrued every quarter and payable on maturity.
The loan was to be redeemed at a 10 per cent premium on maturity in September 2018, with AFC also given the option of converting the debt into ARM’s stock at a price of Sh66.36 per share.
ARM’s recent financial difficulties, coupled with its share price collapse saw the parties amend the credit terms in what led to the payout and restructuring of the remaining debt into a new six-year loan.
The cement manufacturer paid AFC Sh1.4 billion in the year ended December 2016, reducing the obligation from Sh5.5 billion the year before.
“The payout was a combination of accrued interest and compensation for taking away their (AFC) conversion rights,” ARM’s chief executive Pradeep Paunrana told the Business Daily.
He added that the debt has been rolled over at an interest rate of nine per cent, according to the amended credit terms.
Mr Paunrana did not say what portion of the Sh1.4 billion reflected the fee charged for restructuring the debt.
AFC failed to exercise its conversion rights between April 2013 and June 2015 when ARM’s stock trades satisfied the Sh66.36 per share threshold, peaking at Sh90 in some trading sessions.
The firm’s stock fell sharply from July 2015 on the back of losses, mounting debt problems and the general bear market at the #ticker:NSE.
It traded at Sh21 last Thursday, marking one of the largest peak-to-trough declines at the Nairobi bourse.
If AFC had exercised its conversion rights, it would have ended up with 78.1 million shares or 15.7 per cent equity in the cement manufacturer based on shares outstanding prior to the recent entry of CDC Group.
ARM took a Sh14.4 billion equity investment from CDC to settle part of its debt, with the institutional investor receiving a 42 per cent stake and diluting existing shareholders by the same margin.