Old Mutual Holdings Plc has been granted key exemptions to convert a Sh8.1 billion loan owed to its parent firm into preferential shares, allowing it to save on debt service costs.
The regional underwriter, which is majority owned by Old Mutual East Africa Holdings Group Limited, said that the Treasury has lifted a restriction that would have barred the parent firm from holding more than three-quarters of the company’s share capital.
Kenya restricts foreign ownership of entities operating in certain sectors and specified fields, including engineering, insurance and telecommunications firms.
The exemption will allow Old Mutual East Africa to raise its share capital in Old Mutual Holdings through the conversion of the debt to equity, which will raise its stake in the firm to more than 66.7 percent, which is the limit set for foreign ownership.
“The Group converted this debt into preferential shares, but the nature of the transaction needed some exemptions from the National Treasury, which we now have,” Old Mutual Holdings chief executive officer Arthur Oginga said.
“The exemption touches on the rule that foreign investors cannot control more than 66.7 percent of the capital of an insurance company. Preferential shares are considered part of capital and would push Old Mutual East Africa past this limit.”
Old Mutual Holdings disclosed that it had secured an agreement with its parent in October 2023 to convert existing shareholder loans.
The loans were a combination of foreign currency-denominated loans amounting to Sh6.2 billion ($48.1 million) and local currency loans of Sh1.9 billion.
The conversion would occur through the allotment and issuance of 1.754 million preferential shares worth Sh5 each.
The preferential shares are to be non-convertible, non-cumulative, and redeemable at the option of the company.
The shares are to attract a coupon of 21 percent based on the expected equity returns.
Old Mutual has been banking on the conversion of the parent firm’s loans to manage its debt service costs and reduce its foreign exchange exposure.
“The proposed conversion is essential in strengthening the balance sheet of the company as it will result in a significant reduction in its debt obligations and thereby improving the financial position of the company due to reduced finance costs as well as avoidance of currency devaluation losses,” the firm said previously.
Old Mutual East Africa Holdings Group Limited held a 66.58 percent stake in Old Mutual Holdings at the end of last year, represented by 140.9 million shares, ahead of Bawan Limited and James Ngatia, who held a 15.79 percent and 4.6 percent stake, respectively.
The 1.75 billion preferential shares were yet to be allotted at the end of December 2024.
Old Mutual’s finance costs rose modestly to Sh580 million in six months to June 2025 from Sh529 million during a window when exchange rate movements were largely contained.
The underwriter recorded Sh7.7 billion as borrowed funds as of June, from Sh7 billion a year prior.
The firm’s net profit for the period fell by 99 percent to Sh5 million from Sh327 million from lower interest income, fair value losses, and lower insurance premiums earned.
