Investment firm TransCentury is set to allocate 70,120 preference shares to Kuramo Capital as part of a transaction that will see the private equity firm inject $20 million (Sh2 billion) into the company.
Besides the shares, Kuramo will also get 93.7 million ordinary shares equivalent to a 24.99 per cent stake in the Nairobi Securities Exchange (NSE)-listed firm.
The Sh2 billion will be used to repay part of TransCentury’s bond that was cut in half to Sh4 billion after negotiations with bondholders.
TransCentury did not disclose the terms of the preference shares which usually have a higher priority claim on the company’s assets and earnings than ordinary shares.
Their contract generally requires that they are paid a fixed rate of dividend first – amounting to a form of interest - before any dividends are paid on ordinary shares.
The entry of Kuramo is part of TransCentury’s efforts to pay the 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.
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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 this 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 Sh11.3.
The stock has however rallied over the past few days, jumping from lows of Sh4.5.