Companies

TransCentury reaches settlement with bondholders

zeph

TransCentury chairman Zeph Mbugua. PHOTO | FILE

TransCentury has reached a settlement with its bondholders halving its principal debt to $40 million (Sh4.04 billion) in unclear circumstances, just two days before the bond’s maturity date.

Following last weeks’ equity injection of $20 million (Sh2.02 billion) by South Africa’s Kuramo Capital, an investment manager, TransCentury’s outstanding debt is now down to a similar amount.

The investment firm, which is listed at the Nairobi Securities Exchange, says it is in the “process of raising the balance” and that its “bondholders are comfortable with the structure in place to retire the outstanding total agreed debt.”

The process remains subject to regulatory approvals, including the approval of the Capital Markets Authority and shareholders where applicable, TransCentury noted in a statement sent to newsrooms late Wednesday night.

“This agreement validates the confidence Kuramo and other investors have in TransCentury and reflects our commitment to maximizing investor value,” Zeph Mbugua, TransCentury’s chairman, said in the statement.

The investment firm did not disclose the details of how the initial debt was condensed by half and which compromises, if any, it had to agree to in order to close the deal.

However, sources have indicated to the Business Daily that the bondholders agreed to write-off half of the debt owed to them, in consideration of the interest earned since the Eurobond was listed in 2011.

They are also said to have softened their stance given the impact that the weakened shilling has had on the bond over the period, inflating the original dollar-denominated debt of Sh6 billion to the current level.

The bondholders however expect to be paid the balance of the debt in coming months, the source said.

“The majority bondholders are pleased to have reached an amicable and well-structured settlement with TransCentury Group,” said Paras Shah, a partner at Coulson Harney, the law firm that facilitated the transaction.

“Further, the majority bondholders congratulate Kuramo Capital on their equity capital injection, which was a key factor in reaching this settlement.”

TransCentury bondholders recently wrote to a select group of the firm’s founder shareholders, laying out a set of demands that was to see them get Sh4 billion in cash by March 25 and gain control of the company by 2017.

READ: TransCentury now gets fresh proposal to pay Sh8bn debt

Upon receipt of the initial sum in cash, the bondholders wanted the redemption date to be extended by one year to March 2017, according to the letter sent to Eddy Njoroge, Jimnah Mbaru and the estate of the late James Gachui.

Thereafter, the creditors had proposed that TransCentury undertakes a rights issue whose proceeds will be used to settle the outstanding debt and that that the same bondholders will underwrite the cash call.

Investors and market watchers will be keen to know the actual details of the latest agreement and how it will potentially affect the structure and performance of the infrastructure firm going forward.

TransCentury issued the $75 million Eurobond five years ago on the on the Mauritius Stock Exchange ahead of its listing the same year.

The bond, which was at the time valued at Sh6 billion, has been accruing an annual interest of six per cent while a further six per cent premium is to be paid on the units held to maturity.

The Sh8 billion TransCentury has been grappling with is more than four times its current market capitalisation of Sh1.5 billion and higher than its net assets of about Sh3.6 billion as of June 2015.

This reality pushed the company into a tight spot where it was at the mercy of its bondholders.

A week ago, the investment firm announced that it had entered into an agreement with Kuramo Capital to inject Sh2 billion, ceding an unknown stake in the firm.

“Our experience in sub-Saharan Africa, underlined by our commitment to building and cultivating local market leaders, aligns well with TransCentury’s strategy,” Shaka Kariuki, Kuramo’s co-chief executive officer, said of the latest deal.

“We are delighted to partner with one of Africa’s most prominent investment companies.”