Companies

S. Africa micro lender wants 70pc bond dues cancelled

real

(L-R) Real People Chief Executive Officer Daniel Ohonde, board member Nthenya Mule and Nairobi Securities Exchange chief executive officer Geoffrey Odundo during the bell ringing to mark the start of Real People bond trading at the Nairobi bourse. PHOTO | SALATON NJAU | NMG

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Summary

  • The South African small business lender said it wants to enter a deal with Mauritius-based Chike Africa on the condition that investors agree to the steep haircut.
  • Chike will acquire 100 percent of Real for nominal consideration and put in Sh675 million ($6 million) in two tranches to restructure the business.

Real People wants bondholders to cancel 70 percent of their Sh1.3 billion notes and forgive interest payments for one and a half years in a bid to restructure the lender.

The South African small business lender said it wants to enter a deal with Mauritius-based Chike Africa on the condition that investors agree to the steep haircut.

Chike will acquire 100 percent of Real for nominal consideration and put in Sh675 million ($6 million) in two tranches to restructure the business.

The deal will see bondholder get paid their watered-down investments over three years to 2025 and interest charges will be restarted in March next year.

Investors in the Real People bond issued in 2015 have not been able to redeem their money since they matured in 2018 after the company sunk into financial distress.

The company has been postponing repayment dates and now says if it pays the entire bond it will use up all its money putting the business at risk of shutting down.

“In order to pay interest on the notes or redeem the notes due on February 28, 2022, the company will have to curtail its business operations extensively, in so doing and by the outflow of almost all of its cash reserves, the sustainability of the company will be damaged,” Reap People said in a notice to creditors.

The bond for a three-year tranche was to mature in August 2018 and a five-year tranche in 2020.

The lender has made several proposals including a clause in one of the meetings that allowed it to keep the money up till 2028 turning three- and five-year bonds into a 13- year bond.

Real People said during the postponements it would keep paying interest charges but now wants to renege on the offer.

The use of the bond proceeds has also come to question after four former directors at the company were fined a combined Sh15 million by the Capital Markets Authority for their roles in diverting bond proceeds to South Africa.

Twelve former bosses and directors including five Kenyans and seven South Africans are in trouble with the regulator who ordered an inquiry into the company. Seven directors appeared before an independent committee set up by CMA.

Out of who four were penalized, the rest sought to block the regulator and filed a case at the capital markets tribunal.

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