Debt swap ups Aga Khan's stake in Serena Hotel

A section of Serena Hotel, Nairobi. [File, Standard]

Majority shareholder in the firm that operates Serena hotel brand has agreed to a debt swap deal that will see it increase ownership in the hotel.

Aga Khan Fund for Economic Development (Akfed) announced yesterday it has agreed to convert $14.5 million (Sh1.7 billion) loan owed by TPS Eastern Africa into equity.

The transaction, if approved by regulators, will increase Akfed’s direct shareholding in TPS Eastern Africa to 64.36 per cent from the current 45.04 per cent.

Akfed says the deal will help strengthen TPS’ balance sheet and accelerate the recovery from the Covid-19 pandemic, which hurt the pace of growth in the hospitality industry. “Akfed strongly believes that the conversion is important to ensure the long-term sustainability and growth for TPS and its group going forward,” said Akfed.

“This will offer further flexibility to TPS and its group of companies to grow its business over time, by improving its debt service capacity to the current lenders.”

At 64.36 per cent, Akfed is entitled to apply to the Capital Markets Authority (CMA) for a takeover and acquire the remaining ordinary shares in TPS. However, Akfed says it has applied to the CMA to be exempted from the Capital Markets (Take-overs and Mergers) Regulations, 2002 and will therefore not pursue a takeover.

TPS cut its net loss from Sh1.2 billion in 2020 to Sh632.9 million in the year ended December last year as sales increased with the receding Covid-19 pandemic.

The Nairobi Securities Exchange-listed firm is recovering from Covid-19 disruptions which were marked by travel restrictions and cancellations of many bookings as the infectious virus spread.

TPS’s long-term borrowings increased to Sh5.5 billion last year from Sh4.9 billion in the previous year.