East African Breweries Plc (EABL) is set to raise up to Sh20 billion from the sale of a new bond, soon after announcing that it will repay its existing Sh11 billion bond at the end of this month, a year before its scheduled redemption date of October 29, 2026.
The Business Daily has established that the upcoming corporate bond has received regulatory approval but its terms, including the offered interest rate and tenor, was not immediately available.
The brewer’s current bond has a fixed interest rate of 12.25 percent and the sale of the new and larger security indicates that the company hopes to secure a cheaper rate.
EABL earlier said the redemption of the bond will be financed by, among other sources, short-term bridge financing.
In opting for early redemption, EABL furthered the trend initiated by student accommodation focused developer, Acorn Holdings Ltd, which executed early redemption of its Sh5.7 billion corporate bond in September 2024.
EABL’s quick return to the debt market soon after early redemption of the Sh11 billion bond signals intention by the manufacturer to rejig its capital structure by retiring expensive debt while taking on cheaper debt given the favourable pricing trend in the market presently.
In the second half of its financial year to June 2024, EABL paid down Sh11 billion before accelerating this further by paying down another Sh5 billion in a similar period in the next year.
The debt repayments were done with a view to cushion the firm’s bottom-line from steep finance costs occasioned by a high interest rate environment.
Yields in the debt market have been on a general decline ever since Kenya’s refinancing of the $2 billion June 2024 eurobond, boding well for the cost of funding outlook for corporates that are looking to raise debt capital through the domestic market.
Whereas it is not yet clear how many tranches the manufacturer intends to issue to raise the aggregate Sh20 billion, sources familiar with the transaction indicate that the proposal likely to carry the day, is a dual tranche of Sh10 billion each by the manufacturer.
EABL’s return to market is being arranged by Absa Securities Ltd which will also serve as the placing agent alongside Absa Bank Kenya with PricewaterhouseCoopers (PwC Kenya) earmarked to serve as the reporting accountant. The transaction’s legal counsel is Bowmans Kenya while the note trustee is MTC Trust and Corporate Services Ltd.
EABL’s return to market will also draw to an end the three years long corporate bond issuance drought with the last issuance having been by the Kenya Mortgage Refinance Company (KMRC) in 2022 which attracted applications worth Sh8.1 billion for a Sh1.4 billion issuance.
EABL remains the most active in the corporate bond market which has shrunk significantly after defaults by multiple issuers in previous years.
