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FEP eyes debt after owners snub Sh2.6bn rights issue


Maurice Korir, FEP Group chief executive. FILE PHOTO | NMG

Fountain Enterprise Programme (FEP) Group has turned to debt after shareholders snubbed its Sh2.6 billion rights issue floated last July.

The local investment group, partly backed by the Kenyan diaspora, raised Sh120 million from the cash call where existing shareholders were offered three new shares priced at Sh18 apiece for every eight stocks held.

FEP chief executive Maurice Korir said the chama is currently seeking short-term loans and plans to hire a transaction adviser to help raise cash to complete unfinished projects and provide liquidity for the day-to-day running of its units.

The rights issue did not have a minimum subscription rate, hence the cash raised — about 4.6 per cent of the target — was accepted, FEP said.
“We’re seeking short-term bridge loan facilities amounting to Sh102 million. We secured a commitment this week,” Mr Korir told the Business Daily.

“We plan to hire an advisory firm to raise capital for the group. We’ll announce details in July,” he said in an interview.

The delay in announcing results of the FEP rights issue was caused by the slow uptake of the cash call, which forced the investment firm to postpone several times the closing date of the offer initially set for November 4, 2016.

FEP’s cash call was handled by Standard Investment Bank as lead transaction adviser.

This undersubscribed rights issue brings to six the number of funding rounds done by FEP since inception, including another cash call held in 2014. It has cumulatively raised more than Sh4.3 billion in capital.

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The chama’s 2014 rights issue failed to reach its target of Sh6.4 billion after members only took up shares worth Sh2.4 billion, a success rate of 37.5 per cent.

FEP was founded in 2002 and currently has more than 70,000 shareholders — a significant stock being Kenyans residing in the UK and US.

It bounced back to black with a net profit of Sh106.01 million in the period to December 2016, compared to a loss of Sh905.7 million a year earlier, helped by lower costs and a tax credit. It made a loss of Sh1.4 billion in 2014.

“For us to post better results in 2017, we need to recapitalise some of our subsidiaries as well as the holding company,” said Mr Korir.

The investment group had disclosed that Sh900 million would be pumped to complete the upcoming 146-key Suntec Hotel in Sagana, Kirinyaga County.