EABL floats Sh11bn bond to repay debt

The issue breathes new life in the corporate bond segment which stagnated after investors lost money after the collapse of Chase and Imperial Bank

In Summary
  • Minimum subscription to the five-year offer is Sh100,000 with annual return of 12.25 per cent. 
  • The beer maker was last in the capital markets in 2017
Production at the East African Breweries Limited plant in Nairobi/FILE
Production at the East African Breweries Limited plant in Nairobi/FILE

East African Breweries Limited (EABL) has floated a Sh11 billion Corporate bond to repay part of its maturing loans. 

In a public notice, the Nairobi Securities Exchange listed brewer said the offer runs from October 6 to 21.

The minimum investable amount of the bond that will be listed on the Fixed Income Securities Investment Segment of the Nairobi Securities Exchange, is Sh100,000 and integral multiples of Sh100,000 with an annual return of 12.25 per cent. 

''The proceeds of the issue will be used to repay certain borrowings taken in the ordinary course of the business to provide working capital for the group,'' EABL said in the statement.

The offer comes just five months after it retired the second tranche of another Sh11 billion issue floated in 2015.

Investors earned an interest of 14.17 per cent on the Medium Term Note Programme of 2017 which raised a total of Sh6 billion. The initial one raised Sh5 billion.

The placing agents for EABL's MTN Program are Absa Kenya Plc with  Absa Securities as sponsoring brokers  and Image Registers as paying agents. Coulson Harney Advocates are the transactions legal advisors.

The brewer, majorly owned by global beer manufacturer Diageo took a hit from Covid-19 pandemic after government closed and later reduced working hours for  among other Covid-19 restrictions, cutting down its earnings for the year ended June 30.

The firm’s net earnings in the review period stood at Sh6.96 billion compared to Sh7.02 billion a year earlier,  a move that saw it freeze dividend payouts to preserve capital.

Yesterday, the firm also announced a name change to East Africa Breweries Plc starting October 1 after the board approved shareholders' decision during the September 14 annual general meeting. 

''Pursuant to the issuance of certificate of change of name by the Register of Companies, the firm has changed its name from East African Breweries Limited to East African Breweries Plc,'' it said in statement.   

A PLC designates a company that has offered shares of stock to the general public. The buyers of those shares have limited liability.

The issue opened Wednesday (yesterday) breathes new life in the corporate bond segment that somehow took a backward step in active issuance after investors lost money after the collapse of  Chase and Imperial banks in 2015 and 2016.

Most of the issuers redeemed their bonds and opted for alternative sources of funds including loans from banks, shareholders, private equity and development finance institutions.

As at the end of December 2020, there were only six outstanding commercial papers valued at Sh19.1 billion, according to the Capital Markets Authority’s quarter one 2021 statistical bulletin.

This year, Family Bank  raised Sh 4.42 billion, marking a subscription of 147.3per cent, against a Sh3 billion target with a green shoe option of Sh1 billion in its first tranche of corporate bond offer via public placement.

The bank was seeking to raise Sh4 billion, with a minimum subscription of Sh100,000 or equivalent, with a five and a half years tenure priced at 13 per cent  per annum.

This issuance came  after the lender successfully redeemed its five and a half years (5 and ½ year) Medium Term Note worth Sh2.02 billion on April 19.