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kengen announcement :rights issue resolution
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Aguytrying
#81 Posted : Sunday, December 13, 2015 11:17:04 AM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
Ericsson wrote:
The conversion of gava debt to equity will be done in such a way that gava maintains its 70% stake.
As below which is a caption from the financial statement
Borrowings awaiting conversion to equity 26(d) 20,151,541

KENGEN past issuances have always been 100% uptake or oversubscription.
The 2009 PIBO that was done in a severe bond market than this one being witnessed.


Can't you see that gov here is just screwing wanjiku? Not a penny are they investing, only conveniently converting debt to equity, aNd wanjiku left to bankroll the rights issue after which she will be screwed just like kplc, Kq a few years ago.
The investor's chief problem - and even his worst enemy - is likely to be himself
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sparkly
#82 Posted : Sunday, December 13, 2015 12:36:33 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
Aguytrying wrote:
Ericsson wrote:
The conversion of gava debt to equity will be done in such a way that gava maintains its 70% stake.
As below which is a caption from the financial statement
Borrowings awaiting conversion to equity 26(d) 20,151,541

KENGEN past issuances have always been 100% uptake or oversubscription.
The 2009 PIBO that was done in a severe bond market than this one being witnessed.


Can't you see that gov here is just screwing wanjiku? Not a penny are they investing, only conveniently converting debt to equity, aNd wanjiku left to bankroll the rights issue after which she will be screwed just like kplc, Kq a few years ago.


@aguy if you look at Kengen Financial statements you will see that Kengen has the following categories of loans:

1. Loans guaranteed by GOK;
2. Loans from IFDs directly to Kengen;
3. Loans from local banks;
4. Loans borrowed by GOK and on lent to Kengen.

Kengen is paying interests on all the above loans.

Loans from IFDs are low interest, long term maturity.

Loans from local banks are high interest, shorter term maturing.

Total loans currently stand at $1.4B. Equity $0.6B. Kengen needs to borrow an additional $1B for projects by 2018.

The strategy for restructuring is:

1. GOK loans conversion reduces Kengen indebtedness, cuts the interest payments to GOK and boosts the equity of the company.
2. Proceeds from Wanjiku will retire the shorter term high interest local loans, conserve cash.
3. Total debt reduced by 30B, equity boosted by 30B to bring the debt equity to around 1:1 which is normal for utilities.
4. Kengen left with longer maturing, low interest loans from IFDs.
5. Forex differences on the borrowings are not a problem since they are passed on to the consumer through KP.

IMO the above approach is sound on paper and good for equity holders . As long as projects are brought online quickly there is a revenue increase to offset earnings dilution since Kengen is paid for installed capacity as well as units sold.

Drawback is that Kengen is not done with borrowings and plans to borrow an extra $1B. Expect a second rights issue in 2019/20.
Life is short. Live passionately.
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muandiwambeu
#83 Posted : Sunday, December 13, 2015 1:06:11 PM
Rank: Veteran

Joined: 8/28/2015
Posts: 1,247
kawi254 wrote:
The 30% private shareholders will not all be able to take up all their rights, Goverment will end up with ~80% or KenGen can take advantage of new Companies Act and buy back the shares that will not be taken up. The real reason KenGen is doing a rights is to get more borrowing headroom to maintain Debt:Equity ration of 70:30

Seems even more palpable. Why convert through a rights issue? Gova should have kengen entirely on its own. The debt is Govas, what advantages will the 30% shareholders get from the conversion and the associated costs of capital restructuring that warrants dragging wanjiku into this private member's club? And if anything why is this not privately arranged. 100%conversion is not enshrined in that press statement. Is the current capital structure efficient or not is not a question for gova since either way, gova is calling the shots as lender and a owner.
My take is a shocker is on the way. What's the worst case scenario here? Paying a debt that went to costly tenderprenuers and waxing up to the ogre for another round of binge. Let's watch it as it pan's out. Fench sitting here at the Garden.
My one milli dollar quizs are, what portion will gova convert and what shall be of the unconverted debt. Will gova pump in a coin for probable remainder of its rights allotment?
What use is 30‰ shareholders pay go to?
,Behold, a sower went forth to sow;....
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sparkly
#84 Posted : Sunday, December 13, 2015 1:30:17 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
muandiwambeu wrote:
kawi254 wrote:
The 30% private shareholders will not all be able to take up all their rights, Goverment will end up with ~80% or KenGen can take advantage of new Companies Act and buy back the shares that will not be taken up. The real reason KenGen is doing a rights is to get more borrowing headroom to maintain Debt:Equity ration of 70:30

Seems even more palpable. Why convert through a rights issue? Gova should have kengen entirely on its own. The debt is Govas, what advantages will the 30% shareholders get from the conversion and the associated costs of capital restructuring that warrants dragging wanjiku into this private member's club? And if anything why is this not privately arranged. 100%conversion is not enshrined in that press statement. Is the current capital structure efficient or not is not a question for gova since either way, gova is calling the shots as lender and a owner.
My take is a shocker is on the way. What's the worst case scenario here? Paying a debt that went to costly tenderprenuers and waxing up to the ogre for another round of binge. Let's watch it as it pan's out. Fench sitting here at the Garden.
My one milli dollar quizs are, what portion will gova convert and what shall be of the unconverted debt. Will gova pump in a coin for probable remainder of its rights allotment?
What use is 30‰ shareholders pay go to?


See post #82 and @VVS posts, then read the Financial Statements 2015 & Rights Memorandum for an informed decision if to take part in the rights.

Don't be caught up in ignorant speculation.
Life is short. Live passionately.
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Boris Boyka
#85 Posted : Sunday, December 13, 2015 2:12:00 PM
Rank: Veteran

Joined: 11/15/2013
Posts: 1,977
Location: Here
Date and Venue of AGM?
Everybody STEALS, a THIEF is one who's CAUGHT stealing something of LITTLE VALUE. !!!
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muandiwambeu
#86 Posted : Sunday, December 13, 2015 2:15:37 PM
Rank: Veteran

Joined: 8/28/2015
Posts: 1,247
sparkly wrote:
muandiwambeu wrote:
kawi254 wrote:
The 30% private shareholders will not all be able to take up all their rights, Goverment will end up with ~80% or KenGen can take advantage of new Companies Act and buy back the shares that will not be taken up. The real reason KenGen is doing a rights is to get more borrowing headroom to maintain Debt:Equity ration of 70:30

Seems even more palpable. Why convert through a rights issue? Gova should have kengen entirely on its own. The debt is Govas, what advantages will the 30% shareholders get from the conversion and the associated costs of capital restructuring that warrants dragging wanjiku into this private member's club? And if anything why is this not privately arranged. 100%conversion is not enshrined in that press statement. Is the current capital structure efficient or not is not a question for gova since either way, gova is calling the shots as lender and a owner.
My take is a shocker is on the way. What's the worst case scenario here? Paying a debt that went to costly tenderprenuers and waxing up to the ogre for another round of binge. Let's watch it as it pan's out. Fench sitting here at the Garden.
My one milli dollar quizs are, what portion will gova convert and what shall be of the unconverted debt. Will gova pump in a coin for probable remainder of its rights allotment?
What use is 30‰ shareholders pay go to?


See post #82 and @VVS posts, then read the Financial Statements 2015 & Rights Memorandum for an informed decision if to take part in the rights.

Don't be caught up in ignorant speculation.

@sparkly I have been around for a well to know my way around. There are no permanent houses(ph) in stocks. The word is more like this lean and efficient capital structure ie equity, debts, etc and all of them have a cost. Has a shareholder I will recommend a capital structure that leaves me wealthy, in growth and that I measure by a firms ability to attract better credits low interest, ability to raise funds guarantees me growth and marginal returns. Am not getting that here and the senses are out through the window. Post #82 says the risk lurks and I nid to fully access the cost.
,Behold, a sower went forth to sow;....
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VituVingiSana
#87 Posted : Sunday, December 13, 2015 2:29:07 PM
Rank: Chief

Joined: 1/3/2007
Posts: 18,351
Location: Nairobi
@AGuy - I was creamed during the KPLC Rights Issue. KPLC was due for a triennial review [as indicated in the IM] of rates just after the Rights Issue. Then GoK denied that rate increase after the Rights Issue. Thereafter the price crashed and I sold out at a loss. Over time, I have built up an aversion to investing 'Kenya' firms. I acknowledge I am tempting fate by being in KenRe.

@Sparkly - Ultimately, it's a 'bond-like' play.

@Ericsson

A dividend yield of 7.81% vs 14.81% [For easier calcs, assume 14.81% instead of the average of 14.75% or the 14.95% as the average bid] means the IFB gives 7% more. All income is after tax. I will use some assumptions to ease the mathematics.

Which means I can buy the IFB and invest/save the balance of the 7% for the duration of the IFB. It was a 9-yr IFB with some early principal repayments so effectively 7 years. 7% (compounded) x 7 years = 60%. Therefore KenGen shares have to rise by 60% in 7 years for KenGen = IFB. That is possible. Plus IFB interest is 'fixed' but KenGen can increase (or decrease) its dividends.

Here is the catch. If you look at KenGen as a dividend play then you must remain happy with 7-10% yields. Any increase in the share price is a bonus.

I have limited cash therefore I chose KenRe & KenolKobil with lower dividend yields but a better chance of price appreciation. Plus the level (& cost) of debt:equity is important to me. KenGen need to invest a lot into new projects & those loans will be priced to included risk associated with elections, eurobond indebtedness, US Fed, etc. In addition, lenders will want guarantees & ring-fenced cashflows which favor accelerated debt repayments over dividends.

KenRe DPS = 0.70 Price = 21.75 DY = 3.22% less WT = 3.06%
KK DPS = 0.25 Price = 8.00 DY = 3.12% less WT = 2.97%
KenGen DPS = 0.65 Price = 7.90 DY = 8.22% less WT = 7.81%
[For KK I used 0.25 vs 0.20 since the 0.10 interim leads me to believe the final will be 0.15 or more]

So KenGen is not a bad buy especially if the Rights Price is at a further discount for those looking for a 'bond' but for @VVS looking for Total Return, I will go for KenRe or KK for now.

I will keep an eye on KenGen and at some point, if (& when) I feel the management has put behind it the shady deals, over valued assets, tenderpreneurship, etc then I may look at it as my 'bond' but not this time around. My gut feeling is that the share prices will see ups and downs therefore I may get into KenGen at a similar level to today's price hence preserving my Dividend Yield.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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sparkly
#88 Posted : Sunday, December 13, 2015 2:33:26 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
muandiwambeu wrote:
sparkly wrote:
muandiwambeu wrote:
kawi254 wrote:
The 30% private shareholders will not all be able to take up all their rights, Goverment will end up with ~80% or KenGen can take advantage of new Companies Act and buy back the shares that will not be taken up. The real reason KenGen is doing a rights is to get more borrowing headroom to maintain Debt:Equity ration of 70:30

Seems even more palpable. Why convert through a rights issue? Gova should have kengen entirely on its own. The debt is Govas, what advantages will the 30% shareholders get from the conversion and the associated costs of capital restructuring that warrants dragging wanjiku into this private member's club? And if anything why is this not privately arranged. 100%conversion is not enshrined in that press statement. Is the current capital structure efficient or not is not a question for gova since either way, gova is calling the shots as lender and a owner.
My take is a shocker is on the way. What's the worst case scenario here? Paying a debt that went to costly tenderprenuers and waxing up to the ogre for another round of binge. Let's watch it as it pan's out. Fench sitting here at the Garden.
My one milli dollar quizs are, what portion will gova convert and what shall be of the unconverted debt. Will gova pump in a coin for probable remainder of its rights allotment?
What use is 30‰ shareholders pay go to?


See post #82 and @VVS posts, then read the Financial Statements 2015 & Rights Memorandum for an informed decision if to take part in the rights.

Don't be caught up in ignorant speculation.

@sparkly I have been around for a well to know my way around. There are no permanent houses(ph) in stocks. The word is more like this lean and efficient capital structure ie equity, debts, etc and all of them have a cost. Has a shareholder I will recommend a capital structure that leaves me wealthy, in growth and that I measure by a firms ability to attract better credits low interest, ability to raise funds guarantees me growth and marginal returns. Am not getting that here and the senses are out through the window. Post #82 says the risk lurks and I nid to fully access the cost.


I now see your investment criteria.

I was pointing pointing out the kind of loans Kengen has on its books and the purpose of the rights.

Also pointing out that for utilities debt/leverage is necessary as long as the cost of debt is cheap enough and the equity holders are left with a return.
Life is short. Live passionately.
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Ericsson
#89 Posted : Monday, December 14, 2015 11:09:15 AM
Rank: Elder

Joined: 12/4/2009
Posts: 10,809
Location: NAIROBI
Good analysis by @sparkly concerning financial statements,debt and purpose of the rights issue.
Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
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Aguytrying
#90 Posted : Monday, December 14, 2015 2:31:56 PM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
Ericsson wrote:
Good analysis by @sparkly concerning financial statements,debt and purpose of the rights issue.


@sparkly. I now understand your explanation above on debt and equity regarding gava. Let's hope the company will keep its end of the bargain after wanjiku keeps theirs via rights issue.

Like someone said, gava might have more shareholding after rights coz I just can't see wanjiku doing the 30%.
The investor's chief problem - and even his worst enemy - is likely to be himself
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