TransCentury Fails to Hit its Sh2B Cash Call Target

Despite a second try, infrastructure-based investment company TransCentury missed its Sh2 billion cash call target.

The firm’s rights issue had a 40.13 percent success rate, according to results published yesterday, mobilizing Sh828.1 million from the purchase of 752.8 million shares.

For a price of Sh1.10 per share, the company had offered its shareholders an extra 1.876 billion shares, valued at Sh2.063 billion and representing five new shares for each current share owned.

The ratio of entitlement prior to the application for more shares, which totaled 498,725 and had a value of Sh548,598 per share, was accepted by shareholders, who agreed to take up 480.1 million shares valued at Sh528.1 million.

The conversion of shareholder loans resulted in the application for an additional 272.7 million shares, with the value of the shares acquired through the conversion coming to Sh300 million.

Kuramo Capital, which now owns a 25% ownership in the business, decided to convert a portion of the Sh1.9 billion in loans it had given TransCentury in order to cover its share of the rights issue.

Kuramo would increase its share in the company to a controlling hold, but TransCentury did not specify the size of the conversion.

On April 26, the Nairobi Securities Exchange (NSE) is anticipated to open for trading of the new shares.

The rights offer had been scheduled to begin on December 29 with the goal of releasing funds for the company to recapitalize its operations, pay down debt, and provide working capital.

The fact that the closing date of the rights issue was moved from January 23 to February 3 suggests that demand may not have been as high as anticipated.

TransCentury would reopen the issuance on March 20 to March 31 to extend the offer’s validity past the closing date.

The conversion of a shareholder’s loan by Kuramo Capital to pay for its part of the rights offering was approved by shareholders at an Extraordinary General Meeting on March 16 prior to the re-opening.

TransCentury stated that the conversion would still be in line with the rights offering goal of decreasing debt even if it was uncertain whether Kuramo cash would invest additional cash on top of the shareholder loan conversion.

Rights offerings increase a company’s cash flow by enabling current shareholders to acquire additional shares at a reduced price.

Nevertheless, due to declining share values at the NSE in recent years, businesses have started to avoid the practice.