Dec 19, 2016

The Competition Authority of Kenya has approved Kuramo Capital Management’s acquisition of a 24.99% stake in Trans-Century Limited through issue of 93.8 mn new ordinary shares and 70,120 cumulative preference shares i.e. 100% of the redeemable preference shares, in TC Mauritius Holdings. This follows Kuramo Capital’s USD 20 mn convertible debt investment into the company to assist in refinancing TC Mauritius Holdings’ Limited Senior Unsecured Convertible Bond of USD 60.3 mn.

This is a positive move as (i) it brings on board a key strategic partner that has the same focus as Trans-Century, and this will drive growth and investment in region, thereby maximizing shareholder value, (ii) with the introduction of Kuramo Capital into Trans-Century’s board, there will be an improvement in corporate governance structure, as a number of transactions can’t be carried out without their explicit approval, including limits on issuance of debt, and equity, and entering into any related-party transactions, as highlighted in our Cytonn Monthly-October 2016, (iii) the transaction will reduce the firm’s bond interest charges and also enhance Trans-Century’s ability to source for cheaper funds, and (iv) the transaction doesn’t result in a takeover of Trans-Century by Kuramo Capital as usually required by private equity investors in a distressed company, but only a dilution to current shareholders amounting to 24.99%, demonstrating Kuramo Capital’s confidence in the firm’s valuation, and willingness to work with current shareholders and management to drive strategy and unlock value.