TransCentury rights issue gets CMA nod

Companies

TransCentury rights issue gets CMA nod


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TransCentury’s chief executive, Ng’ang’a Njiinu. FILE PHOTO | NMG

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Summary

  • The Capital Markets Authority (CMA) has approved the proposed rights issue by investment firm TransCentury whose capital was wiped out by years of losses.
  • TransCentury will raise unspecified new capital from investors by selling them additional shares.
  • The company could raise a gross amount of Sh1.9 billion from the rights issue, assuming it sells the new shares at current market prices.

The Capital Markets Authority (CMA) has approved the proposed rights issue by investment firm TransCentury #ticker: TCL whose capital was wiped out by years of losses.

TransCentury will raise unspecified new capital from investors by selling them additional shares, bringing back a form of corporate funding that went out of favor among Nairobi Securities Exchange #ticker: NSE -listed firms.

“The CMA has granted approval to TransCentury Plc to undertake a rights issue. The rights will be issued on the basis of five new ordinary shares for every one existing share, ”the company said in a statement.

“Funds from the rights issue will go towards supporting the last phase of TransCentury turnaround plan, recapitalizing our business, to reduce debt and unlock working capital for underlying businesses.”

The proposed cash call comes after the company’s share price collapsed to trade at Sh1.06 on Monday. The company could raise a gross amount of Sh1.9 billion from the rights issue, assuming it sells the new shares at current market prices.

Offering a discount to entice investors will result in a lower capital raise. The company has 375.2 million ordinary shares. The investment firm is expected to announce the pricing of the rights issue at a later date.

TransCentury’s anchor shareholder is private equity firm Kuramo Capital with a 24.99 percent stake, with the rest of the ownership fragmented among some 1,800 individual and institutional investors.

The company last reported a net loss of Sh1.3 billion in the half year ended June 2020, reversing a net income of Sh297.6 million the year before.

The loss, which widened its negative equity to Sh8.4 billion, was the result of reduced sales, foreign exchange losses, and higher finance costs.

The rights issue is the latest plan by the company to recapitalize the business. It had previously planned to raise funds from private equity firms which wanted it to delist from the stock market as a condition for accessing the capital.

The proposed transactions were subsequently abandoned and the process of launching the rights issue was initiated.

TransCentury previously said it had significant contracts but it found it difficult to take advantage of them due to capital constraints.

The company is now betting on the rights issue to halt its decline.

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