Kenyan Investment firm Centum Retires 6 bln Shilling Corporate Bond Debt

Centum HY Results: Posts Pretax Loss of Ksh 1.98 Billion 

Kenya’s Centum Investment has retired its debt from the five-year corporate bond worth 6 billion shillings ($62 million) issued in 2015, it said on Monday.

According to the firm, “With this repayment, Centum Investments has fully retired all its medium and long term debt having repaid Ksh 7.8 billion of the USD dollar-denominated debt in September 2019.”

“Many thanks to the team for achieving this critical strategic objective 14 months into our Centum 4.0 Strategy Period,” Chief Executive James Mworia said. 

Mworia said this was part of strengthening its capital structure and enhancing its liquidity as one of the five core pillars of Centum 4.0 strategy.

 “We have delivered on this critical strategic objective. We have in the same period significantly enhanced liquidity which is the second aspect of this strategic pillar by Ksh 6.7 billion.”

When it was issued, the bond was oversubscribed by 38 percent attracting bids worth KSh8.3 billion.  The bond was made up of a fixed-rate component and an equity-linked portion that gave a variable return determined by the firm’s net asset value. The total amount accepted for the fixed-rate notes was K Sh3.9billion while for the equity-linked notes KSh2.1billion, with the fixed-rate notes and equity-linked notes having coupon rates of 13 percent and 12.5 percent respectively.

The funds were used to construct Two Rivers mall and a 3 star hotel, City Lodge Hotel.

In the year ended March 2019, the company posted a 48 percent jump in net profit to KSh4.12 billion attributed to capital gain and land revaluations.

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“We believe that the source of the funds was from the sale of the bottlers which was actualized in 1H20. As at end of 1H20, Centum had Ksh 11.9 billion in cash and cash equivalents from the sale and eventual retirement of USD denominated debt.

Since then it has repaid Ksh 3.5billion of short term debt in October 2019, thus leaving the Company with approximately KSh 8.4billion that has been used to retire the bond, assuming zero OPEX charge.

“Having sold most of its legacy assets, our key concern on Centum gravitates on the absence of cash-generating assets in the near term.”

The Real Estate Portfolio which accounts for 70.8 percent of the Centum’s Net Asset Value, will take considerable haircuts given the subdued demand for real estate under the current macros. As a result, we remain bearish on the counter.”

Commentary from Standard Investment Bank.