- EABL will now rely on long-term borrowing to finance its capital spending, which it says will improve its liquidity.
- The company has several multibillion shillings loans due within a year, contributing to an overall short-term liability in excess of its current assets.
East African Breweries Plc (EABL) will now rely on long-term borrowing to fund its capital spending, which it says will improve its liquidity.
The company has several multibillion shillings loans due within a year, contributing to an overall short-term liability in excess of its current assets.
“The group’s statement of financial position shows a net current liability position of 5.6 billion shillings (2020: 5 billion shillings),” EABL said in its latest annual report for the year ended June.
“Directors believe this is transitional in nature as the group continues to align capital spending with long-term funding.”
The company noted that the Capital Markets Authority had exempted it from maintaining a current ratio of one – corresponding to short-term assets and short-term liabilities – until June 2023.
EABL reports that its board investment committee held eight meetings during the review period during which members reviewed new capital spending plans and restructuring funding proposals.
One of the main short-term loans is an 11 billion shillings facility that the brewer has taken out from Absa Bank Kenya and its sister banks in Africa.
The loan matures in July 2022 and bears interest at 10.3%.
The brewer is currently in the market to raise 11 billion shillings through a new corporate bond, with the proceeds to be used to pay off some short-term debt, among other corporate uses.
“The proceeds of the issue (…) will be used by EABL to repay certain loans contracted in the normal course of business, to provide working capital to the group throughout East Africa and to refinance certain loans in the short term, ”the brewer said in an advisory. .
The unsecured bond will mature in five years and bear a fixed interest rate of 12.25%.
Offer ends October 21. Bondholders will invest a minimum of 100,000 Sh and additional amounts in multiples of 10,000 Sh.
Banks and bondholders have been willing to lend to EABL due to its profitability and position as a brewer with the largest market share in the region.
“The group has not violated any financial covenants for the facilities issued by its bankers as of June 30, 2021. The group had unused facilities of 11.4 billion shillings as of June 30, 2021 (2020: 4.1 billion shillings ), ”EABL says in the report.