Africa Finance Corporation, a Nigeria- based development-finance institution that is providing a $50 million convertible loan to Athi River Mining Limited (ARM), may get a 13.62 percent stake in the Kenyan cement maker if the loan is converted into equity.
A convertible loan is similar in all respects to an ordinary loan, other than the provision that the lender can opt to convert the loan value into equity in the borrower entity rather than receiving monetary payment for the loan.
Africa Finance is providing the loan to help fund an expansion by Kenya’s second-biggest cement company in eastern and southern Africa, including adding 1 million metric tons of production capacity, Athi River said in a statement on March 27.
Should the Africa Finance Corporation want to convert the loan into equity it will be at $3.3 per share. This converts to 273 shillings per share, which is higher than Athi River’s current share price of 161 shillings. The reason for this is so as to avoid dilution of the market by injecting a significant amount of shares which would reduce the value of the shares currently trading.
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