TPS Serena sets date for trading of issued rights

The rights issue timetable indicates that the offer will close on August 31 and that the firm will issue a price later.

Local companies have stepped up their fundraising plans in the second half of 2010 after a lull in the first half as they seek to build their war chests to capture opportunities in Kenya’s recovering economy.

The companies are expected to raise about Sh35 billion from the capital markets in the second half—offering higher returns in an economy where traditional investment homes offer marginal earnings.

“Apart from KCB, the other issues are fairly small, and are not likely to cause a liquidity crunch in the market,” said Mr Wycliffe Masinde, an investment analyst at Kestrel Investment Bank.

“Timing of rights issues to ensure that they do not over lap is crucial now, including the refund process, added Mr Masinde.

Besides TPS Serena, KCB is seeking to raise Sh15 billion through a rights issue, Standard Chartered Bank issued a Sh2.5 billion rights issue and the Kenya Power and Lighting Company (Sh10 billion).

Safaricom is also set to issue a Sh7 billion corporate bond.

These issues come at a time when returns from bank deposits and government securities have fallen due to excess cash in the economy.

The deposit rate— the interest that banks pay customers for money left in their accounts for a specified period of time — has been declining as the short term government debt market gets saturated, leaving companies and high net worth individuals with loads of cash to keep in the bank.

Returns on the 91-day Treasury Bill dropped 7.2 per cent in June, 2009, to 1.7 per cent while rates on wholesale deposits have dropped from 11 per cent to six per cent over the same period

Compared to last year when Kenya’s capital markets generated a Sh36 billion investment opportunity for those with cash through corporate bonds, only a private placement by cement maker Athi River Mining of Sh1.2 billion came through in the first half of 2010.

Proceeds of the TPS rights issue will be used to capitalise Jaja Ltd, a special purpose vehicle to be used by TPS (Kenya) for the development of tourist properties in Kenya.

The new projects will include the construction of Elementaita Serena Luxury Camp, acquisition of a 51 per cent stake in Upekee Lodges Ltd and an asset buyout at Mbuzi Mawe Tented Camp and Mountain Village in Tanzania.

Flagship hotel

The money will also be used in the refurbishment of Nairobi Serena, the flagship product of the group and Kigali Serena Hotel.

The firm is also set to acquire TPS Uganda Ltd in a share swap arrangement as part of its regional expansion programne after acquiring a new resort property last year to complement its five-star city hotel, Kampala Serena Hotel and renaming it Lake Victoria Serena Resort.

TPS had also been given the go-ahead to issue bonus shares to be distributed at one for every six held by shareholders in its register by the end of this week.

TPS reported a 58 per cent increase in pre-tax profit to Sh520 million in 2009.

The hotel chain is expected to post better earnings in 2010 as the local tourism sector eyes a record year after arrivals for the first five months of the year surpassed the peak levels of 2007.