TransCentury banks on $48m cash fix
Saturday August 07 2021
According to the report, the Group is also in the process of disposing some of its non-operating assets with a view of raising Ksh843 million ($7.8 million) to shore up its cashflow position. PHOTO | FILE
Regional infrastructure investment firm TransCentury Plc, is depending on its shareholders to inject an addition Ksh4.4 billion ($40.74 million) of new capital through a cash call in less than two months and a further Ksh843 million ($7.8 million) through the sale of non-core assets to avert a potential liquidity crisis that could adversely impact its operations as a “going concern.”
The loss-making firm, which is listed on the Nairobi Securities Exchange (NSE) with operations across East, Central and Southern Africa, revealed through its delayed annual report for 2019 that it has embarked on a fundraising initiative to raise up to Ksh4.4 billion ($40 million) by a way of rights issue in which the major shareholder — Kuramo Capital Management LLC — has committed to further invest up to an amount of Ksh1.1 billion ($10 million).
The transaction is expected to be concluded in the third quarter (July-September) of this year subject to shareholder and regulatory approvals.
“Kuramo Capital Management LLC, on behalf of its advised funds, has indicated through a letter of intent, their willingness to support the fundraising process by subscribing to its pro-rata 25 percent rights up to an amount of Ksh1.1 billion ($10 million) subject to the shareholders’ approval and required regulatory approvals,” said the report.
In 2017, the American private equity fund Kuramo Capital, commonly referred to as the Kuramo Africa Opportunity Kenya Vehicle Ltd acquired 24.99 percent stake in the troubled infrastructure investment firm in a deal estimated to be worth Ksh2 billion ($18.51 million).
According to the report, the Group is also in the process of disposing some of its non-operating assets with a view of raising Ksh843 million ($7.8 million) to shore up its cashflow position. These assets include parcels of land and houses owned by the Group’s subsidiaries in Kenya, Uganda and South Africa.
The report added that the group through its subsidiary AEA Ltd (formerly Avery East Africa Ltd) renegotiated and received an offer letter on September 4, 2020 from Equity Bank for a 10-year loan facility of Ksh1.06 billion ($9.81 million) to help AEA Ltd acquire assets of another subsidiary, Civicon Kenya. The funds would be used to pay off the existing short-term loan in Civicon books due to the same lender (Equity Bank).
The new facility has a moratorium of 12 months on principals and interest and the management are in the process of negotiating an extension of the moratorium from 12 months to 24 months.
‘The directors are aware that a material uncertainty exists, which may cast significant doubt about the Group and Company’s ability to continue as a going concern and, therefore that the Group and/or Company may be unable to realise their assets and discharge their liabilities in the normal course of business,” the report said.
In 2019, the Group had outstanding loans amounting to Ksh3.43 billion ($31.75 million) for which it had breached the loan covenants with the lender, prompting one of the lenders (Equity Bank Kenya Ltd) to issue a demand letter to the Company on October 14, 2019 with respect to amounts of Ksh1.4 billion ($13.58 million) that were overdue as at October 8, 2019.
In May, TransCentury made a U-turn on its earlier plans to delist from the Nairobi bourse arguing that it had found a better option of raising additional capital from the existing shareholders. The group’s chief executive Nganga Njiinu said the firm is seeking to issue two billion new shares in the ratio of five new shares for every two held.
Last year, the firm announced that it needed to exit the NSE to access new capital from private equity funds that will only invest in it as a non-listed business. TCL has invested in nine operating subsidiaries offering various products and services within the infrastructure sector.
These include electrical cables and conductors, transformers, switchgear and related electrical control equipment, all within the Power Division, and engineering, procurement and construction services within the Engineering Division.
The group increased its losses to Ksh3.93 billion ($36.38 million)in 2019 from a loss of Ksh3.5 billion ($32.4 million) in 2018, with its negative working capital reducing slightly to Ksh10.89 billion($100.83 million) from Ksh11.16 billion ($103.33 million) in the same period.
In 2017, the firm announced a five-year strategy (2018-2022) focusing on fund-raising and debt reprofiling to match cashflows.