NSE bond issuer Real People seeks to convert Sh1.26bn bond to equity
From left: Capital Markets Authority CEO Paul Muthaura, former Real People board member Nthenya Mule and NSE chief executive Geoffrey Odundo during the ringing of bell ceromony to mark the start of its bond trading in August 2015. FILE PHOTO | NMG
The firm has started negotiations with bondholders to convert the bond into shares even as the first tranche matures this month.
The medium-term note launched in early August 2015 targeting retail, high-net worth individuals and institutional investors saw investors take up Sh1.363 billion in five-year fixed rate notes and Sh270.3 million in three-year fixed rate notes.
If successful, the move will decrease the liability as well as the interest expense and boost working capital as it scouts for a strategic partner.
A South African-linked credit-only micro-finance firm Real People Kenya Ltd is unable to service the Sh1.26 billion bond issued in 2015 and is seeking to convert it into equity.
The firm, with accumulated losses of Sh815 million and a negative equity of Sh65 million by end of March 2018, has started negotiations with bondholders to convert the bond into shares even as the first tranche matures this month.
The medium-term note launched in early August 2015 targeting retail, high-net worth individuals and institutional investors saw investors take up Sh1.363 billion in five-year fixed rate notes and Sh270.3 million in three-year fixed rate notes.
“The company is in negotiations with the holders..., which implies no repayment of a material size in August 2018,” the company said.
If successful, the move will decrease the liability as well as the interest expense and boost working capital as it scouts for a strategic partner.
External auditors BDO East Africa Kenya have issued a disclaimer opinion stating that a material uncertainty exists that may cast significant doubt on Real People’s ability to continue as a going concern.
BDO further notes that it was not able to obtain sufficient appropriate audit evidence to support the board’s assertion that the company will continue being in business.
“In our opinion, the Company will not be able to meet its current obligation in August 2018,” said BDO.
In December, South African Global Credit Ratings said there was a strong possibility that the group will breach its capital adequacy ratio in the near term, or fail to meet debt obligations.
Launched in Kenya in 2006, Real People has struggled to have a stable board. Its managing director Neil Grobbelaar resigned on January 8, 2018, just six days after director Arumugam Padachie resigned.
Mr Albert Ruturi (director) and Ms Nthenya Mule (non-executive) also left in July last year.
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