Two Rivers Mall will convert a Sh4.5 billion loan into a security that will see an undisclosed lender earn dividends and get a share of the shopping complex if the owners decide to sell it, in a plan to reduce interest expenses.
The debt was part of $96 million (Sh10.89 billion) secured during the construction of shopping and office complex that started in 2017.
The deal comes as Centum Investment Company, which owns the property indirectly through Two Rivers Development Limited (TRDL), plans to reduce finance costs and maintain a zero long-term debt to improve its investment income.
Centum Investment Company CEO James Mworia, however, failed to disclose the lender, adding that the unnamed entity would earn capital gains distributed using a predetermined ratio if shareholders decided to exit.
“In this case, there is no coupon we will be paying each year. Because that is what we were trying to avoid. If there is an exit, the financier will gain from share the profit,’’ Mr Mworia said
“There is a pre-agreed formula that changes year to year and provides the ratio in which they will participate in the equity upside. The shareholding of the Centre will not change.
The lender will also receive dividends, based on the formula.
The Two Rivers Lifestyle Center – with a mall, shops, ATMs, retail mobile and storage units, cinema and offices – is equally owed by Old Mutual Properties and the TRDL.
TRDL is a company owned by Centum Investment (58 percent), AVIC International (39 percent) and Kenya Development Corporation (KDC) (three percent).
The financing agreement is expected to save the company Sh340 million per annum and turn Centre’s cash flow positive.
This comes as Centum Investment plans to reduce finance costs and operating expenses to below 50 percent of investment income and have the rest used for dividend distribution and reinvestment.It recorded 1.9 percent drop in debt to Sh4.04 billion in the six months to September compared to Sh4.12 billion in the year ended March. The debt has dropped from Sh14.65 billion in 2017.Finance costs declined by 27.9 percent to Sh326.96 million over the debt reduction in the nine months period to September compared to Sh453.77 million in same period last year.“Although we own 58 percent in TRDL, in our financial statement we have consolidated as if we own 100 percent. It is important for us that the entity is profitable. We are supporting the management of the various portfolio to optimise […]
