Two Rivers inks Sh4.5 billion debt swap deal
Two Rivers Lifestyle Center, the holding company of Two Rivers Mall, has signed a deal to replace its Sh4.5 billion loan with a zero-interest, equity-linked instrument thereby easing the pressure on the burden of servicing debt for the company.
This implies that Two Rivers Lifestyle Center will save on loan interest payments on the portion of the debt that has been replaced while allowing its financiers a chance to benefit from the value appreciation of the investment.
The Two Rivers Lifestyle Center, which encompasses Two Rivers Mall and Two Rivers Office Towers, is co-owned on a 50:50 basis by Old Mutual Properties and the Two Rivers Development Ltd where the Nairobi Securities Exchange-listed Centum Investment Company, AVIC, and Kenya Development Corporation (KDC) are shareholders.
“The financing arrangement will see the replacement of a substantial portion of the existing senior loan with a zero-coupon instrument, but which participates in the upside of on the equity value uplift on the Center,” said James Mworia, CEO of the Centum Investment Company Plc.
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Centum suffered a net loss of Kes1.37 billion in the year ended March 2021, its first full-year loss in over 42 years hurt by a drop in sales and investment income.
The loss was a drop from a Kes4.63 billion net profit recorded in the 12 months ended March 2020.
The firm’s replacement of the Kes4.5 billion loan has been made possible by improved performance of the Two Rivers Lifestyle Center in the past two years since My Spectrum Ltd, a property management firm headquartered in Europe, took over its day-to-day management.
My Spectrum has ramped up occupancy in the mall and increased the average daily traffic to the business hub.
The improved footfall has led to improved revenue and boosted cash flows for the center.
Heavy financing costs saw shareholders of Two Rivers Lifestyle Center embark on a review of the capital structure to rebalance debt and equity and ease annual interest payments.
The financing agreement is expected to yield savings in interest costs of roughly Kes340 million per year.
