Centum Investments Company Plc has settled Sh2.3 billion debt using internally generated cash after plans to raise funds from the sale of its Sidian Bank stake to Nigeria’s Access Bank collapsed.
The Nairobi Securities Exchange-listed firm had planned to sell its entire 83.4 percent stake in Sidian Bank to the Nigerian lender for Sh4.3 billion and use part of the money on debt repayment but the deal collapsed mid-January.
Centum’s chief executive James Mworia told the Business Daily the firm has used proceeds from land sales and loan repayments from its subsidiaries.
“We retired the debt using alternative sources. We used proceeds from land sales by our portfolio companies and subsequent repayment of shareholder loans to Centum,” said Mr Mworia.
Mr Mworia said the company is yet to find a new buyer for its stake in Sidian Bank whose growth was slowed down by the outbreak of the Covid-19 pandemic and the introduction of interest rate controls in September 2016.
The investment firm in June last year signed an agreement to sell its entire stake in Sidian Bank to Access Bank but the deal collapsed in January after the Nigerian lender insisted on paying the Sh4.3 billion in tranches rather than once as proposed by Centum.
It took a view to shift from a debt-funded investment strategy and started dialling down risk by repaying the loans it had built up so as to preserve the equity capital.
The company had borrowings of Sh4.1 billion as of March last year, marking a reduction from Sh16.2 billion as of March 2019.
Its subsidiaries on the other hand had debt amounting to Sh16.4 billion which is secured by their respective assets and cash flows.
Its strategy was to clear all debt at the parent company level by the financial year ending March 2024, according to its earlier statement.
Centum previously sourced funding for its various businesses but changed tact to allow the subsidiaries to take loans they can repay without recourse to the parent firm.
Becoming debt-free at the parent company level is part of the company’s strategy of reducing risk and building investor confidence after receiving feedback that it was carrying too much debt.
Its share price had dropped to a record low of Sh8 on July 27 before embarking on a recovery. The share closed Monday at Sh9.06, representing a 6.84 percent year-to-date return.
