Companies

EABL Sh11bn bond oversubscribed three times

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Jane Karuku, EABL Group chief executive. PHOTO | FILE | NMG

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Summary

  • Investors bid a total of Sh37.9 billion in the issuing round, EABL said, representing an oversubscription of 275 percent.
  • The Capital Markets Authority (CMA) said the oversubscription reflected renewed investor confidence in the corporate bond market.
  • Investors in the instruments have traditionally asked for above-market interest rates as compensation for lack of collateral and looser covenants.

East African Breweries Limited (EABL) said yesterday its Sh11 billion bond was oversubscribed by more than three times signalling renewed investor confidence in the previously troubled local bond market.

Investors bid a total of Sh37.9 billion in the issuing round, EABL said, representing an oversubscription of 275 percent.

“We issued this medium-term note based on our proven track record in the debt capital markets and we are pleased that investors have resoundingly expressed their confidence in this business, and the willingness to share value from our growth,” said EABL group chief executive Jane Karuku in a statement.

“The fact that this achievement was delivered in the face of depressed economic conditions further signifies the belief investors have in our strategy as this business turns 100 next year.”

The five-year, fixed-rate instrument is offered at an interest rate of 12.25 percent payable semi-annually.

The offer was opened on October 6 and closed on October 21 and will be listed for trading on the Nairobi Securities Exchange from November 1.

The Capital Markets Authority (CMA) said the oversubscription reflected renewed investor confidence in the corporate bond market.

Some issuers have defaulted or restructured their obligations in recent years, causing major losses for bondholders whose claims were unsecured.

ARM Cement, Nakumatt Holdings, Chase Bank and Imperial Bank are some of the borrowers that have defaulted on their bonds and commercial papers.

“I am delighted with the performance of the EABL medium-term note which is a testament of the renewed interest in the corporate bond market with growing issuer and investor confidence,” CMA chief executive Wyckliffe Shamiah.

Investors in the instruments have traditionally asked for above-market interest rates as compensation for lack of collateral and looser covenants.

EABL has increased its borrowing in recent years, partly to fund new capital expenditures.

EABL, for instance, is building a Sh15 billion factory in Kisumu that will produce its Senator beer brand that targets low-income consumers.

It received loans amounting to Sh300 million for the construction of the plant in the year ended June, with more funding set to be sourced as the project progresses. The company had undrawn available funding of Sh13.4 billion as of June.

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