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The Nairobian

TransCentury at risk of default, says regulator

Business

By The Standard Business | Mar 08, 2016

TransCentury Ltd may be at risk of defaulting on its bonds, the market regulator said yesterday.

The Capital Markets Authority (CMA) said the firm is among at least six domestic companies it is working with on liquidity constraints.

TransCentury has about Sh7.6 billion ($75 million) of convertible bonds falling due on March 25, Paul Muthaura, the acting chief executive officer of the authority said in a statement.

TransCentury is the guarantor of the bonds, which were issued by a Mauritius-based subsidiary, he said.

The company hasn’t converted the bonds into equity as expected after shareholders refused to be diluted further, Muthaura said.

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“Due to this refusal, there is a perceived threat of a default by TCL,” he said. “The CMA has had several engagements with the TCL management and board chairman and the firm is considering measures of arriving at a settlement since it has adequate assets to meet its obligations if given time.”

TransCentury spokeswoman Phyllis Gachau wasn’t available when Bloomberg called for comment. Mauritian Financial Services Commission acting Chief Executive Officer P.K. Kuriachen didn’t answer his mobile phone when called for comment. Mauritian government offices are closed Monday for a public holiday.

“We have made it extremely clear to the company that especially with the uncertainty in the market; they need to, as soon possible, put out the final details of the arrangement they are putting in place to allow investors to understand the current outlook,” Muthaura said in a phone interview. “So it will, without question, be before March 25.”

Holders of TransCentury’s bonds include London-based Charlemagne Capital Ltd, according to data compiled by Bloomberg. Sharat Dua, a portfolio manager at Charlemagne, didn’t immediately respond to an e-mailed request for comment. TransCentury shares climbed 0.9 per cent to Sh6 yesterday.

The CMA is also closely monitoring other companies that have cash constraints, notably cement manufacturer ARM Cement Ltd, Mumias Sugar Company, real-estate company, Home Afrika Ltd, national carrier, Kenya Airways Ltd and retailer Uchumi Supermarkets Ltd.

ARM Cement has had “liquidity challenges” that cast doubt on whether it would be able to meet its obligations on privately arranged commercial-paper programs, Muthaura said. The company has been operating on “large loans”, some of them foreign-denominated, and is expected to bring on board a strategic partner this month, he said