UAP Old Mutual Group chief financial controller Agnes Chege (left) and CEO Peter Mwangi during the announcement of the group’s full year financial results on April 2, 2019. PHOTO | DIANA NGILA
Multinational has suspended the planned loan-to-equity transaction indefinitely.
UAP had announced that the loan-to-equity deal, meant to ease its debt burden, would be concluded in 2018.
UAP’s chief executive Peter Mwangi told Business Daily that the debt-to-equity deal remains an option for Old Mutual.
Financial services giant Old Mutual has failed to take an extra 6.5 per cent stake in UAP Holdings after a plan of converting the multinational’s Sh2.6 billion loan to the Kenyan insurer into shares was suspended.
UAP had announced that the loan-to-equity deal, meant to ease its debt burden, would be concluded in 2018 but the multinational has suspended the transaction indefinitely even as it amended the terms of the debt.
Old Mutual’s only transaction in UAP shares last year related to the purchase of a combined six per cent stake from the insurer’s directors and founding shareholders Joe Wanjui and James Muguiyi for Sh3.2 billion in November. This raised its interest in UAP to 67 per cent.
UAP’s chief executive Peter Mwangi told Business Daily that the debt-to-equity deal remains an option for Old Mutual.
“No decision has been taken on the conversion. The debt is outstanding and convertible at the option of the lender. The terms of the loan have been amended to extend the tenure and we continue to service the debt,” Mr Mwangi said.
But it is not clear why the proposed deal was not implemented within the initial timeframe.
Board approval
The insurer had said the transaction would require approval of its board which Old Mutual controls on the strength of its majority stake.
With the proposed deal shelved, UAP’s debt burden grew in the year ended December and saddled the company with higher finance costs, contributing to the Sh518 million loss in the period.
Its borrowings rose by Sh258 million to Sh11 billion in the review period while its finance costs increased by Sh245 million to Sh1 billion. Old Mutual provided the additional debt.
“There was an additional drawdown of an Old Mutual loan facility that was put in place in 2017,” Mr Mwangi said.
The proposed debt-to-equity transaction was part of UAP’s efforts to ease its heavy debt burden that had seen it explore multiple options, including renegotiating loan terms with financiers such as the International Finance Corporation (IFC).
UAP had taken the loan to fund construction of Equatorial Towers –an office building in Juba, South Sudan.
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