East African Breweries Plc (EABL) will refinance its Sh11 billion corporate bond at a lower interest rate of 11.8 percent, a move that will reduce its finance costs by Sh49.5 million per annum.
The company’s bond, with a fixed interest rate of 12.25 percent, was due to mature on October 29, 2026, but the brewer decided to redeem it early at the end of this month.
On Monday, the Nairobi Securities Exchange-listed firm offered a five-year bond of a similar amount at an interest rate of 11.8 percent, the proceeds of which are expected to be received on November 18, 2025.
This means that the existing bond will be repaid using short-term credit facilities, with the bond proceeds to be received less than three weeks later.
“The early redemption of the 2021 bond is being funded through a combination of existing financial arrangements and short-term bridge financing, in line with our disciplined approach to managing debt and liquidity,” EABL’s chief financial officer Risper Ohaga told Business Daily earlier this month.
EABL has been incurring an annual interest expense of Sh1.34 billion per annum on the existing bond, but this is set to fall to Sh1.29 billion, assuming it raises the entire amount from the new bond offer.
The brewer recently received approval from the Capital Markets Authority (CMA) to raise up to Sh20 billion from the debt market, with the Sh11 billion marking the first phase of the fundraising programme.
Besides marginally 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 to a current (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 liabilities — 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.
In the bond disclosures, EABL states that the funds to be raised will be used for general business purposes and to repay other borrowings.
“The proceeds of the issue of the notes (after paying all expenses of the issue) will be used … for the group’s general corporate purposes and by the company to repay certain borrowings taken in the ordinary course of business,” the brewer said.
Besides refinancing the corporate bond at a lower cost, EABL is also benefiting from a drop in the cost of borrowing from banks. Most of its bank loans have interest rates tethered to returns on short-term government securities and which have declined substantially over the past year.
EABL has multiple bank loans whose interest rate is charged at the prevailing 182-day treasury bill rate plus a premium starting from 1.5 percent.
The interest on the short-term security stood at 7.865 percent in last week’s auction, pulling the cost of some of EABL’s bank loans below 10 percent.
