Infrastructure investment firm TransCentury in US$48m cash call from shareholders

KENYA – Infrastructure investment firm TransCentury Plc, is looking at its shareholders to inject an additional US$40.74 million of new capital through a cash call in less than two months and an additional US$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,” reports The East African.

The Nairobi Securities Exchange (NSE)-listed loss-making firm 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 US$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 US$10 million.

The transaction is expected to be concluded in the third quarter of 2021 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 US$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 US$18.51 million.

According to the report, the Group is also in the process of disposing of some of its non-operating assets with a view of raising US$7.8 million to shore up its cash flow 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 US$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.

The new facility has a moratorium of 12 months on principals and interest and the management is in the process of negotiating an extension of the moratorium from 12 months to 24 months.

“The Group is also in the process of disposing of some of its non-operating assets with a view of raising US$7.8 million to shore up its cash flow position”

‘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 realize their assets and discharge their liabilities in the normal course of business,” the report said.

In 2019, the Group had outstanding loans amounting to US$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 US$13.58 million that were overdue as at October 8, 2019.

In May 2021, 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.

In 2020, 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 US$36.38 million in 2019 from a loss of US$32.4 million in 2018, with its negative working capital reducing slightly to US$100.83 million from US$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 cash flows.

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