East African Breweries Plc (EABL) will absorb all the Sh16.7 billion offered by investors in the sale of its corporate bond, boosting its cash levels as it seeks to clear debt obligations.
The listed brewer had targeted to raise Sh11 billion in the first tranche of the Sh20 billion medium term paper, but investors subscribed the offer to the tune of 152.4 percent.
EABL has now taken up its option of absorbing up to Sh6 billion offered beyond the targeted Sh11 billion in the first tranche, in what is referred to as a green-shoe option, leaving it with headroom to borrow an additional Sh3.23 billion in future tranches.
“In light of this oversubscription, EABL has applied for and on November 12, received approval from the Capital Markets Authority (CMA) to increase the total allotment for the first tranche to accommodate the oversubscription. This increase remains strictly within the Sh20 billion MTN Programme limit previously approved by the CMA,” said the company in a statement.
EABL had said it will use proceeds of the bond for general business purposes and to repay other borrowings.
Before issuing the new bond, EABL had made an early redemption of a previous five-year paper that had an outstanding amount of Sh11 billion, which was to mature October 2026.
The new five-year corporate bond is paying interest at 11.8 percent, which is cheaper than the 12.25 percent rate on the redeemed bond.
The bond oversubscription was attributed to high liquidity in the market and stabilisation of government yields, forcing investors to look for alternative investment vehicles.
“With government yields stabilising and credit spreads normalising, investors are actively rotating into well-rated corporates that offer a yield pick-up above comparable sovereign securities,” said Capital A Investment Bank senior research analyst Ronny Chokaa.
“EABL’s brand strength, predictable cash flows and long operating history also boosted confidence,” he added.
The bond refinancing will help ease pressure on the brewer’s short term liquidity and reduce its financing expenses.
EABL has been incurring an annual interest expense of Sh1.34 billion per annum on the redeemed bond. For the new bond, the company will pay Sh1.97 billion in annual interest, but for a significantly larger amount of principal.
On a like-for-like portion of Sh11 billion (compared to the redeemed paper) the new bond would cost the company Sh1.29 billion in interest.
Besides reducing EABL’s finance costs, the refinancing of the corporate bond will extend the company’s debt profile and boost liquidity.
With a year to go until redemption, the existing bond would have been reclassified as a short term liability reducing the company’s liquidity score.
The CMA requires EABL to maintain a current ratio – the proportion of short term assets to short-term obligations – of more than one. The ratio, which stood at 1.11 times in the year ended June 2025, indicates the company’s ability to meet its short-term obligations.
