KENYA – East African Breweries Plc has raised Ksh 37.9 billion (US$341m) in the recently issued corporate bond under the Domestic Medium-Term Note (MTN) programme.
The accrued amount is three times more than its initial target of Ksh. 11 billion (US$99m), signalling investors’ confidence in the company despite the challenging business environment its currently facing.
Commenting on the 275% oversubscription, EABL Group CEO Jane Karuku said, “We issued this medium-term note based on our proven track record in the debt capital markets and we are pleased that investors have resoundingly expressed their confidence in this business, and the willingness to share value from our growth.
“The fact that this achievement was delivered in the face of depressed economic conditions further signifies the belief investors have in our strategy as this business turns 100 next year.”
The five-year, fixed-rate instrument is offered at an interest rate of 12.25% payable semi-annually.
The offer was opened on October 6 and closed on October 21 and will be listed for trading on the Nairobi Securities Exchange from November 1, reports The Standard.
Risper Genga Ohaga, EABL’s Group CFO noted that the application process was delivered through a digital platform, a first in Kenya.
“EABL is a robust player in the capital markets and this expression of confidence will support our strategy going forward. The subscription rate demonstrates that the market has the depth and sophistication to support significant corporate issuances,” said Ohaga.
The placing agents for the Medium-Term Note Program were Absa Kenya Plc with Absa Securities as sponsoring brokers and Image Registers as paying agents. Coulson Harney Advocates are the transactions legal advisors.
The new issuance came months after EABL’s retirement of a Ksh.6 billion (US$54m) MTN on June 28 this year in an early redemption which was floated in 2017 and was set to mature in 2022.
COVID-19 highly impacts East African Breweries earnings
EABL is expected to deploy proceeds from the commercial debt issue in boosting its working capital and clearing unspecified short-term borrowings maturing in the short-run.
The raised financing will enable it to stay afloat despite taking a hit from the Covid-19 pandemic after government closed bars and later reduced working hours at the outlets, among other Covid-19 restrictions, cutting down its earnings for the year ended June 30.
The firm’s net earnings in the period under review stood at Ksh6.96 billion (US$62m) compared to Ksh7.02 billion (US$63m) a year earlier, a move that saw it freeze dividend pay-outs to preserve capital.
The maker of Tusker, Guinness beer brands, reported 15% growth in revenue to Ksh 86 billion (US$791m), driven by smart investment behind brands, channel focus and innovations, which led to overall volume sales growing by 13%.
The higher turnover was accompanied by cost escalation across production, distribution and other areas, making it narrowly miss a complete performance turnaround with its full year profit to June slipping by a single percentage point.