What you need to know:
- NSE-listed firm says prepared to allocate 94m shares to New York-based Kuramo Capital for Sh20 billion capital injection.
Shareholders of TransCentury are set to take a 25 per cent dilution from the entry of private equity firm Kuramo Capital which has proposed to buy the investment firm’s shares at a large premium to the market value.
The Nairobi Securities Exchange-listed firm said it is prepared to allocate up to 94 million shares to the New York-based fund in return for $20 million (Sh2 billion) capital injection to pay part of its convertible bond.
“To authorise the directors of the company to issue shares to Kuramo Capital,” TransCentury said in an agenda item for the extraordinary general meeting to be held on September 16.
“The actual number of the shares to be allotted will be determined on completion of the transaction but will not exceed 94 million shares.”
If passed, the resolution could see Kuramo emerge with a 25 per cent stake in the company as existing shareholders are diluted by the same margin.
It also means Kuramo has agreed to acquire TransCentury’s shares at a 538 per cent premium on the current market price of Sh4.5 on the Nairobi bourse, indicating its confidence about the firm’s future prospects.
The dilution will see the combined stake of TransCentury’s top ten founder shareholders drop to 35 per cent from the current 46.8 per cent as Kuramo becomes the single largest investor in the company.
Ms Anne Gachui, currently the top individual investor, will see her stake drop from 7.55 per cent to 5.66 per cent.
The equity of former Kenya Revenue Authority (KRA) commissioner ceneral Michael Waweru will fall from 7.53 per cent to 5.65 per cent while that of TransCentury chairman Zephaniah Mbugua will drop from 4.25 per cent to 3.19 per cent.
Other significant investors who will be diluted in the transaction include former NSE chairman Eddy Njoroge, Joseph Magari and Robin Kimotho.
The entry of Kuramo is part of TransCentury’s efforts to pay the Sh6 billion dollar-denominated bond it issued in 2011 and which had grown to over Sh8 billion by its maturity date of March 25 this year on accrued interest and weakening of the shilling.
The firm, which was not in a position to settle the debt in cash, said it had reached an agreement with the majority of the bondholders which led to halving of the outstanding amount to Sh4 billion.
Cash from Kuramo is to pay half the amount while the remaining portion, due next month, could be restructured into a new three-year loan.
A section of the bondholders were also allotted 5.7 million shares in TransCentury, booking a 95 per cent loss in the convoluted settlement plan.
The firm’s share price rout is part of the reasons the bondholders could not convert their units into shares. The firm listed on the NSE at an offer price of Sh50 but the stock has declined to the current range of Sh4.5, representing a 91 per cent decline.