Muthaura says TransCentury’s assets enough to cover Sh8bn Eurobond

Investment firm TransCentury has adequate assets to cover the Sh8 billion bond that falls due on March 25, according to the acting CMA chief executive Paul Muthaura.

The assertion by the Capital Markets Authority, in an opinion article published in Monday’s Business Daily, could influence investors’ view of the stock, whose performance has been weighed down by uncertainties surrounding repayment of the hefty debt.

Mr Muthaura said TransCentury could soon reach a settlement with the bondholders, from whom it borrowed Sh6 billion through a bond in 2011.

“The issuer (TransCentury) is considering measures of arriving at a settlement since the company has adequate assets to meet its obligations if given time,” wrote Mr Muthaura.

“The authority remains engaged on new developments,” he said, adding that CMA has had several engagements with the company’s management and chairman Zephania Mbugua over its “perceived threat of default.”

Mr Muthaura did not elaborate on why the regulator is convinced TransCentury is in a comfortable position relative to clear the debt load, which far exceeds its market capitalisation at the stock market.

The Nairobi Securities Exchange-listed firm said it had net assets of about Sh3.6 billion as of June 2015, significantly below the Sh8 billion bond.

The debt load rises to Sh10.1 billion due to the weakening of the shilling against the dollar, the currency in which TransCentury took the bond.

CMA’s statement, therefore, indicates that the company’s assets have been understated in the books or they have grown substantially in the intervening period.

READ: TransCentury seeks to calm Sh8.1bn bond holders after CEO exit

At the Nairobi bourse, TransCentury is valued at Sh1.6 billion, having lost 88 per cent of its valuation since its listing by introduction in July 2011.

CMA noted that it did not have a role in approving the convertible bond which was issued by TransCentury in Mauritius a month before it converted into a public company through the listing.

The regulator revealed that TransCentury’s shareholders refused to have the bond converted into shares, leaving the original principal to accrue interest ahead of the maturity date.

“As it stands now, the bond was not converted into equity as expected because shareholders refused to be diluted further,” said Mr Muthaura.

TransCentury’s share price has dropped below the set conversion price.

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 have scuttled the conversion window that has since closed, having been set at up to 90 days before the maturity date.