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Struggling firms court investors to get out of mounting debts and losses

Consolidated Bank
Customers at Consolidated Bank's Koinange Street branch in Nairobi. FILE PHOTO | NMG 

Several listed companies have carried unmet targets into 2019 and are now banking on key financial deals to unlock their operational potential.

Most of them are stuck in debt and falling revenues, and have prioritised fresh capital injection as a lever to turning around their fortunes in the next 12 months.

These firms will be hoping to conclude last year’s unfinished business early enough to get the leeway to implement targets for 2019.

Real People, a South African-linked credit-only micro-finance firm, is looking for an investor to help it convince Sh1.27 billion bondholders to wait until 2028 to get their investment back.

With accumulated losses of Sh912.6 million and a negative equity of Sh162.5 million by end of September 2018, it has breached debt covenants and believes getting an investor is the only way out of its financial strain.

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“Subject to the issuer (Real People) securing an agreement with an investor whose identity shall be approved by noteholders holding 75 per cent of the notes — the final maturity dates for all the notes be extended to August 3, 2028,” says the firm.

In banking industry, National Bank of Kenya (NBK) and Consolidated Bank of Kenya, are in search of fresh capital to firm up their lending muscles in 2019.

NBK is waiting for its key shareholders — National Treasury and National Social Security Fund — to give it Sh4.2 billion loan. The money was expected in September last year but by end of November, this had not happened.

“The capital injection will unlock and bolster the key pillars of our growth and place the bank in even a better probability path in the long-term,” said NBK chief executive Wilfred Musau.

Consolidated Bank of Kenya shareholders approved creation of new 175 million redeemable cumulative preference shares valued at Sh3.5 billion and are in search for an investor to take them. It wants to use this to shore up its capital.

Chief executive Thomas Kiyai says the money will help the bank grow its loan book by Sh25 billion, positioning it to become a tier II bank in the medium term. It hopes to seal a financing deal with a strategic investor by March.

“We are confident that by end of this first quarter we will have somebody on board. We look forward to identifying someone who will be willing to commit themselves to that course,” said Mr Kiyai.

Last year, National Treasury injected in the bank Sh500 million, similar to 2014 but the CEO says this could not adequately address the shortfall.

Struggling retailer Uchumi Supermarket will continue with its hunt for a strategic investor to escape the wrath of creditors who want it wound up. Last month, it constituted a financial restructuring team to help get it out of the debt mess.

Also in search for money will be Mumias Sugar and TransCentury, which had a rough 2018 as debt and losses persisted. Both companies want to re-profile their debt structure and secure working capital funding.

Eyes will also be on the strategic direction of Nakumatt Supermarkets, Deacons East Africa and ARM Cement, which last year sank into administration, weighed down by debt and losses.

Fashion retailer Deacons faces a do-or-die test as creditors meet with administrators from PKF Consulting on January 22 to consider and vote for or against options to revive the Nairobi Securities Exchange-listed firm.

The Insolvency Act 2015 empowers administrators to take various measures to rescue a company, with liquidation being the last resort.

ARM Cement is expected to be sold to the highest bidder in an auction. Its administrators, PricewaterhouseCoopers, have received several initial bids including from Nigeria’s Dangote Cement and Oman’s Raysut.

Binding offers are expected by the end of this month, allowing ARM’s creditors to pick the best offer and seal the transaction.

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