Kenya: East African Breweries Ltd. to break Kenya’s 17-month drought of corporate-bond issuance

East African Breweries Ltd. plans to raise 6 billion shillings ($58.5 million) in a sale of five-year debt, breaking a 17-month drought of corporate-bond issuance in Kenya, Bloomberg reported on March 13.

The securities, the second and final portion of an 11 billion-shilling program, offer a fixed annual rate of 14.17 percent until maturity in March 2022, a 64 basis-point premium over the benchmark five-year government bond. The initial offer attracted 12.25 percent.

“The second and final domestic medium-term note will seek to provide EABL an opportunity to match its borrowings with its medium-to-long-term capex and working capital investment aimed at building capacity and optimizing operations within the brewhouse and packaging,” Dorcas Ngure, head of communications at EABL, said an emailed response to questions.

The issue is the first corporate bond since the collapse of Imperial Bank Ltd. in October 2015. The lender was placed under statutory management on the same day its 2 billion-shilling bond was scheduled to begin trading on the Nairobi Securities Exchange. That was followed by the bourse in April 2016 suspending trade Chase Bank Kenya Ltd.’s corporate bonds after the central bank put the lender under receivership.

The EABL offer may attract investor interest because there are few available alternatives in the market, according to Eric Manyara, a portfolio planner at Nairobi-based Sterling Capital Ltd. EABL’s first tranche, through which the company raised 5 billion shillings, was subscribed nearly twice over.

“It will be a success because fund managers and high-net worth investors don’t have many options in this market, and instead of holding money in a lower interest-rate environment, they are better off holding that in a long-term bond,” Manyara said by phone.

EABL shares were unchanged at 213 shillings by 2:57 p.m. in Nairobi.

Kenya has 33 corporate bonds listed at the NSE, accounting for less than 0.5 percent of bond trading at the bourse, with government debt making up the rest, according to the Capital Markets Authority.

13 March, 2017