Ten years ago, TransCentury used to run the show. It was managing mega projects in Kenya and across the region.
It acquired a stake in Civicon, an engineering firm with significant contracts with players in the nascent oil sector.
The company also came to the aid of the concession of Kenya Railways, buying a stake into the Rift Valley Railways, a consortium that won the contract to manage the railway line from Mombasa to Jinja.
Now, it is no secret that the investment firm is in a financial comatose.
But its Chief Executive Ng’ang’a Njiinu doesn’t only believe that the cash-strapped firm will emerge from its current financial turbulence, but its growth will transcend a 100 years.
“These are purely funding issues,” Mr Njiinu told Financial Standard in an interview in Nairobi last week. Optimists are not always right, they are just that, optimists.
At its peak, the share price of the Nairobi Securities Exchange (NSE)-listed company traded at a high of Sh60 a few days after it started trading at the bourse in 2011.
Today, the stock has since tumbled, wiping out billions in paper wealth. Lenders who have extended credit to the firm also stand to lose a fortune as losses eat into its assets.
But according to Mr Njiinu, giving up has never been an option.
“We created this organisation that doesn’t have a termination point,” he said.
TransCentury’s immortality, says Njiinu, stems from its permanent capital. “That is why all these businesses can sit on our balance sheet. We give them the shock absorber,” he added.
Last week, the company said it had completed a debt restructuring deal that saw its subsidiary, East African Cables, reducing its debt by almost half.
The restructuring reduced the group’s debt by Sh1.65 billion or 44 per cent and offered a 10-year extension to the tenure of remaining debts, both firms said in a statement.
Restructuring is part of the company’s solution that will not only move it from one point to the other, but that will ensure its existence for the next 100 years, according to Njiinu.
To get out of turbulence, the firm wants to ensure it has the right funding structure in place and strengthen relationships with stakeholders, including suppliers and clients.
But even more critical for a company whose creditors are eating up all its operating cash, it wants to have an “adult conversation” with its financiers with a view to pushing their debts forward.
“The next thing we needed to do was to work with our financiers to be able to get to structures that are sustainable. And I am talking about the quantum of debt, the repayment so that we can get it back to where there is some sort of equilibrium, where we are able to produce, where there is a healthy balance between repaying debt and re-investing cash into our key capital,” said Mr Njiinu.
To be fair to TransCentury, whose founders included former KenGen Managing Director Eddy Njoroge and businessman Jimnah Mbaru, the investment environment has not been that favourable.
The animal spirits have left a grim outlook in the capital markets with all the NSE indices pointing north. Since January last year, the NSE-20 Share Index, which is the benchmark index, nose-dived by 22 per cent.
The NSE-25 Share index and All-Share index (NASI), on the other hand, fell by 11.1 per cent and 11.9 per cent respectively. A bearish market ate into the firm’s earnings alongside those of UAP Holdings and Britam Holdings.
With a bearish stock market in which several counters blinked red, close to 15 companies issued profit warnings. Although the bearish market hit a number of investors over the period, TransCentury’s cut was deeper.
Four months ago, they also helped refinance a Tanzanian business unit.
Kuramo Capital, which owns a controlling stake in Transcentury, also restructured its debt. “The shareholder loan was restructured and tenor extended by one year as part of the ongoing restructure programme,” said the TransCentury boss in an earlier interview with a local daily.
The rains started beating the firm in early 2016. Back then, it had a Sh8 billion bond that was maturing and there was a view in the market that the company would struggle to honour it.
The perception of possible default dimmed its confidence in the market, further constraining access to new credit. The company had entered into a complicated debt profile with a short maturity period that exposed it to high financing costs.
“The debt profile was not optimal for the business. It is not good business to fund-raise to pay the debt,” Mr Njiinu told Financial Standard.
“We eventually resolved it, but during that period, we lost a significant chunk of our credit lines for working capital. That slowed down our execution and our cash flow and revenues,” he said.
“We have come a long way. There were some mistakes, but TransCentury is now a business that knows how not to do some things,” explained Mr Njiinu, while summing up the history of the 20 years of the infrastructure development firm.
“Sometimes, when a business grows so fast, there could be some things that may not have been foreseen.”
Some people associated the firm’s fast growth with former President Mwai Kibaki’s presidency.
Mr Njiinu doesn’t reckon that their fortunes have changed with the handover of power to President Uhuru Kenyatta from Mwai Kibaki, although their good years seem to coincide with Kibaki’s presidency.
The chief executive insists that these challenges slowed down Transcentury’s growth but not their potential.
“The issues of 2016 made us relook at ourselves internally.”
The first half of President Kenyatta’s presidency was a season of mega infrastructure projects, but a cash-strapped Transcentury was not welcomed to the party.
And now, as the company works to fix its financial problems, it has fixed its eyes on President Kenyatta’s key projects, including manufacturing.
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