Investment firm Centum to sell shares in TRDC and retire US$37m short-term debt

KENYA – Investment firm Centum is seeking to sell part of its shareholding in the Two Rivers Development Company (TRDC) Ltd to retire a US$37.03 million short-term debt whose repayment is taking a toll on its finances.

Chief Executive Officer James Mworia told The East African that the proportion of shares to be surrendered to the new investors will be determined by the current valuation of the Two Rivers Development project whose initial investment cost is estimated at US$231 million.

“The restructuring of the TRDC balance sheet involves adding equity and taking out the debt. We are targeting to reduce this debt by US$37 million in this financial year (2021/2022),” Mr. Mworia said.

“The total debt to TRDC balance sheet is about US$83.33 million. We want to reduce it to US$46.3 million because this US$46.3 million is a long-term, low-cost debt. We need to replace the expensive short term of K$37 million) debt with equity. We need foreign investors to come and put in US$37 million so that we can settle the debt.”

Centum, which is listed on the Nairobi Securities Exchange and cross-listed on the Uganda Securities Exchange (USE), holds a 58 percent controlling stake in TRDC owing to its initial investment of US$17.6 million, with the remaining shares split between the Aviation Industry Corporation of China (Avic) and ICDC at 39 percent and three percent, respectively.

“TRDC is bringing in other equity investors in the company where the existing equity investors will be diluted and the money used to retire the debt. So we will come down further than the 58 percent we are holding,” said Mr. Mworia.

TRDC and Old Mutual Property (OMP) Africa Investment Company each own 50 percent shareholding in the Two Rivers Lifestyle Company (TRLC) Ltd, the developer of the US$147 million Two Rivers Mall in Nairobi.

TRDC narrowed its net loss to US$17.12 million during the financial year ended March 31 from US$55.1 million in the last financial year.

According to Centum, the Two Rivers Development is a prime 102-acre mixed-use urban node that is set to become Kenya’s financial hub, business and residential district of choice located along Limuru Road in Nairobi.

The project, which integrates retail, entertainment and lifestyle facilities, 5-Star hotel, 3-Star hotel, healthcare, commercial facilities, luxury residential apartments, civic, recreational and public amenities, has so far attracted investments of over US$150 million from local and international investors.

Centum Group posted a net loss of US$12.59 million during the financial year ended March 31 compared with a net profit of US$42.8 million in 2020 weighed down by declining sales and investment income.

According to the firm’s audited financial statements, the bulk of the losses in the consolidated statement of comprehensive income was driven by TRDC in which Centum holds 58 percent stake and which booked a loss of US$17.6 million.

“TRDC is bringing in other equity investors in the company where the existing equity investors will be diluted and the money used to retire the debt”

James Mworia – CEO, Centum Investment

“The loss at TRDC is driven by high finance costs on account of the underlying capital structure,” said Mworia.

“The boards of TRDL and Two Rivers Lifestyle Company (TRLC) have initiated steps to restructure the balance sheets to reduce the interest-paying debt and significant progress towards this objective has been made.”

According to Mworia, the completion of the balance sheet restructuring is expected to lead to a significant improvement in the performance of the TRDL Group.

The Centum board, however, recommended a final dividend payout of US$2.01 million translating to US$0.003 per share.

In 2020, the firm rewarded its shareholders with a cumulative dividend payment of US$7.39 million.

Centum has adopted a five-year (2019-2023) plan dubbed “Centum’s 4.0 Strategy” in which it seeks to scale down investments in real estate to between 45 percent and 55 percent from 64 percent of the total assets and reduce investment in marketable securities to between 10 percent and 20 percent from 16 percent of the total assets.

Similarly, the firm shelved negotiations for a US$27.8 million private equity (PE) investment overvaluation fears related to the Covid-19 pandemic, which has slowed private equity and venture capital activities across emerging economies.

Centum had hoped to conclude two deals valued at US$27.77 million in 2019 and 2020 after completing repayment of long-term debts valued at US$133.33 million and creating room US$16.66 million in annual finance cost savings.

The firm is focused on making investments across six sectors in the East African market including FMCG, energy, agribusiness, education and healthcare with a bias towards Buyout and Growth transactions.

The firm’s current PE portfolio companies include Sidian Bank, Isuzu East Africa, Longhorn Publishers, NAS Servair and ACE Holdings.

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