TransCentury secures six-month extension to repay Sh4 billion debt

Industry and Enterprise Development Principal Secretary Julius Korir (centre), is shown finished electrical cable rolls by East African Cables Technical Manager David Mwangi (right). With them is the firm’s chairman Zephania Mbugua. The cable firm is one of the flagship investments of TransCentury. [PHOTO: JENIPHER WACHIE/STANDARD]

Investment firm TransCentury has secured a six-month extension to pay off a Sh4 billion debt that it owes its bond-holders.

The extension is part of a ‘sweetheart deal’ that will also see the bondholders receive only half of their money as full settlement of their bond.

Details of the actual deal reached remain scanty but the management now says the extension will give it headroom to complete its fund-raising initiatives and retire the debt. “We amended the terms of the bond to say that we only owe $40 million (Sh4 billion) payable in six months. This will be the full and final settlement and the bond-holders have agreed that they will be happy to take this and walk away,” the firm’s Acting Chief Executive Ng’ang’a Njiinu said at a briefing yesterday.

He said the bond-holders, who have been receiving a 6 per cent interest every year, accepted to receive Sh4 billion instead of the Sh8 billion initially owed.

TransCentury also last week secured Sh2 billion equity injection from Kuramo Capital, further reducing its exposure to just Sh2 billion. The firm said the new entrant would be given new shares in the deal. Though the company refused to reveal the details of this deal, Kuramo is likely to secure a seat on the firm’s boardroom.

It is also likely to dilute the stake of the old shareholders. The firm hopes  the tripling of production by cable manufacturer East African Cables - in which it has a controlling stake - will also boost its earnings. The company is upbeat that it will now be able to raise the remaining Sh2 billion to fully repay the bondholders by end of September.

But Mr Njiinu declined to offer details of the fund-raising initiatives on grounds that the information is ‘sensitive’ and will be against some of the capital market regulations as well as some confidentiality clauses signed by some of its partners. The firm also maintained that the change of leadership from the Kibaki administration to the Uhuru administration had not affected its business.

“The share of Government business in Kenya is so small. It is less than five per cent and this cannot affect us. Many people think that just because we are in the business of manufacturing cables we must be selling directly to Government. Most of this business is in the private contractors who buy from us,” Mr Njiinu.

The company is upbeat that it will turn around its fortunes and cash in on the new opportunities that are emerging from the public-private partnership deals that are being fronted by the current government. This comes at a time when the company is putting in place a new team of management expected to implement a turnaround strategy to pull it out of the loss-making territory.