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Analysts: US firm may hold majority stake in TransCentury

By Moses Michira | July 5th 2016

The new American owners of TransCentury may have acquired a majority stake in the infrastructure firm.

Analysts from Standard Investment Bank (SIB) have said it is likely that US’s Kuramo Capital acquired a 65 per cent stake in the infrastructure firm listed on the Nairobi Securities Exchange.

TransCentury has, however, not disclosed what stake was granted to Kuramo, which invested Sh2 billion to save TransCentury from lenders.

“Kuramo Capital’s controlling stake in TransCentury is likely positive. TCL [TransCentury Ltd] shareholders will be diluted by at least 65 per cent (by our estimates), following the entry of Kuramo Capital Management (Kuramo) into the business,” SIB said in a note to investors yesterday.

The estimates are informed by the low valuation of TCL shares, which closed at Sh5.05 yesterday, as well as the difficulties encountered by the firm in convincing lenders to convert their loan to equity.

“A level of around 50 per cent is consistent with the previously expected level of dilution from bond holders. The higher dilution follows bondholders’ refusal to exercise conversion rights to equity, following a share price decline and a depreciation of the KES against the USD on which the conversion was based,” the research note reads further.

The investment by Kuramo Capital is expected in September and will be used to pay lenders. SIB says the funds will be used to settle half the debt.

Corporate strategy

Following challenges in implementing its corporate strategy, TCL entered an agreement with lenders in March to slash an outstanding Sh8 billion loan by half. Lenders would also be forced to grant the firm six months to settle the debt due in March.

In corporate filings on the listing yesterday, TCL reported an additional 1.1 million shares that it said were a result of some minority bondholders converting their debt to equity.

The firm has also consolidated its trade finance and term loan facilities across sub-Saharan Africa into one global facility with African Export-Import Bank.

Kuramo’s entry has caused major changes in TCL’s five-member board, and is thought to have taken three slots after Michael Waweru, Robin Kimotho and Peter Tiras Kanyago exited.

Only Zephaniah Mbugua, the board chairman, has remained in the company of the original owners. TCL, which was listed on the NSE at Sh50 a share, also confirmed Ng’ang’a Njiinu as an executive director.

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