The Kenyan and Tanzanian branches of Standard Chartered Bank #ticker:SCBK wrote off more than Sh1.3 billion worth of loans they had advanced to subsidiaries of TransCentury #ticker:TCL, a move that saw the investment firm return to profitability after treating the debt forgiveness as a gain.
The Nairobi Securities Exchange-listed firm explains in its latest annual report details of the debt restructuring that saw it break its loss-making streak in the half year ended June.
TransCentury made a Sh297.6 million net profit in the review period, reversing a net loss of Sh684.8 million the year before.
The positive earnings were largely boosted by a Sh1.3 billion net gain resulting from the write-off of part of the StanChart loans.
East African Cables #ticker:CABL, a subsidiary of TransCentury, reached an agreement with StanChart on December 20, 2018 to pay the lender a reduced amount of its loans as a final settlement.
At that time, the cables manufacturer was already late in repaying loans amounting to Sh3.8 billion, including the StanChart credit facilities.
“The settlement was completed on May 20. The resulting gain on this transaction was Sh1.56 billion which will be recorded in the financial statements for the year ending December 31, 2019,” TransCentury said in reference to the impact of the deal on its consolidated results.
The firm adds that it also took new loans totalling Sh1.6 billion from an unidentified lender in February to settle the StanChart’s reduced claims.
The new loans mature in 10 years and have a grace period of six months and two years on interest and principal respectively.
TransCentury says that had the debt restructuring been completed by December 31, 2018, it would have wiped out the net loss of Sh3.5 billion reported last year.
The company said the transactions would have seen it make a Sh1.2 billion net profit instead.
StanChart is the second major creditor to write off part of its claims on TransCentury. The investment firm in 2016 forced bondholders to halve their claims from Sh8 billion to Sh4 billion, saying it was not in a position to pay them the full amount.
The bond deal was accompanied by a Sh2 billion equity injection from private equity firm Kuramo Capital, which became the company’s controlling shareholder with a 25 percent stake.