TransCentury placed on receivership over Sh4.8b Equity Bank loan

Embattled investments firm TransCentury is down to its knees after being placed under administration over a Sh4.8 billion loan.

Consultancy firm PricewaterhouseCoopers (PwC) has taken over the management of the once profit-making firm and its subsidiary East African Cables, the audit firm said in a paid-up notice in the dailies on Saturday.

PwC linked the move to an inability by the loss-making TransCentury to service the loan from Equity Bank.

The move comes weeks after the company an underwhelming capital-raising plan through the Nairobi bourse.

The receivership marks a remarkable fall from grace for the Kibaki-era investment giant, which once straddled Kenya's corporate and investment scene by dominating lucrative and big-ticket deals like a colossus.

"The placement of TransCentury into receivership was occasioned by the company's continued failure to meet its financial obligations to Equity Bank after advancement of certain loan facilities to the company in 2013," said PwC in the statement.

"The company's obligations to the bank currently stand at circa $34.3 million. The bank, therefore, exercised its powers under its securities by appointing the receivers to take control of the business and assets of TransCentury and recover the monies owed to the bank, in accordance with relevant legislation and regulations."

TransCentury's troubles worsened recently after it missed the target in its bid to raise Sh2 billion through a rights issue after low shareholder subscription.

The cash call raised Sh828.1 million, a 40.13 per cent subscription from the uptake of 752.8 million new shares.

Private equity firm Kuramo Capital, which held a 25 per cent stake in the company, opted to convert part of its Sh1.9 billion in loans extended to TransCentury to pay for its portion of the rights issue.

Despite low capital raised in the transaction concluded in April 2023, the firm said the issue's performance demonstrated strong investor confidence in the company's future.

TransCentury CEO takes a walk amid losses

"We are absolutely thrilled to announce the successful close of this transaction. We extend our sincerest gratitude to our shareholders for their unwavering support and commitment to our vision," said TransCentury Group Chairman Shaka Kariuki.

"This milestone will enable us to meet our obligations and unlock new opportunities for our businesses, as we continue to enhance lives across Africa through investments in infrastructure products, projects, and services."

The funds from the rights issue were to be used to support the final phase of the firm's turnaround plan, recapitalise the business, reduce debt, and unlock working capital for underlying businesses.

Mr Kariuki said the issue was a "success" considering the prevailing market conditions.

"We are cognisant of the current market challenges as the economy stabilises after the effects of the pandemic," he said.

"We thank all investors for their trust in our company. We are now taking bold steps in strengthening our position as a premier infrastructure investment partner in Africa."

The administration process will now give the embattled debt-laden firms a lifeline to recover by keeping away creditors from attaching their property.

Going into administration happens when a company becomes insolvent and is put under the control of licenced insolvency practitioners.

Directors and the secured lenders can appoint administrators through a court process to protect the company and their position as much as possible.

The Insolvency Act of 2015 gives companies going through financial turmoil an opportunity to put their act together, including the settlement of debts.

This allows them to continue to operate instead of the earlier practice of abruptly killing them as was the case with the previous Act.

TranCentury was founded by the "Club of 29" - a group of elite Central Kenya businessmen during the regime of the late President Mwai Kibaki.

The then investment group later grew into a reputable listed firm that would go on to acquire other corporate entities in a multi-billion- shilling investment spree.

Among the most visible names among the founders were former Kenya Revenue Authority commissioner general Michael Waweru, former KenGen Managing Director Eddy Njoroge and business tycoon Jimnah Mbaru.

Its fortunes, however, sunk coinciding with the exit of the former Head of State.

In a previous interview, Mr Waweru rejected the 'Kibaki orphans' tag.

"TransCentury had nothing to do with Kibaki; people just try to link it to him," he told The Standard last year while promoting his memoirs, 'Kenya's Tax Czar'.

"The 29 original TCL members had huge dreams but shallow pockets. We allowed the early success of East African Cables to go to our heads and also assumed that the economy would continue to be favourable.

"We ended up paying the price," wrote the trained accountant in the autobiography with a foreword by Kibaki.

He blamed the downfall of TransCentury on an appetite for debt and early success.

"I believe our biggest mistake was using debt to expand rather than equity, what I would call uncontrolled expansion financed by debt.

"As an investor, you should always balance your debt by injecting enough capital. We didn't do that."

EA Cables, sold to TransCentury by the late billionaire Naushad Merali, was one of the investment firm's top moneymakers but has also since fallen on hard times.

Its share traded at average Sh0.89 on the Nairobi Securities Exchange on Friday, a far cry from its initial public offering price of Sh50 in July 2011.

East African Cables seems to have lost a year-long fight against cheap imports from Asia and counterfeits that ate into its market share.

At its height, the company was the dominant player in the cables industry with operations across East and Central Africa.

The company has manufacturing facilities in Nairobi, Dar es Salaam Tanzania and in eastern DRC.

Its distribution network also includes Uganda, Rwanda, Burundi, Southern Sudan and Ethiopia.