AAR seeks Sh600m loan to fund regional expansion

From left: AAR managing director Mark Achola, IFC director for East and Southern Africa Oumar Seydi, IFC head of health and education in sub-Saharan Africa Biju Mohandas and AAR chairman Dr Frank Njenga during signing of the equity investment by IFC in Nairobi on July 2, 2013. Photo/SALATON NJAU  NATION MEDIA GROUP

By CHARLES MWANIKI

In Summary

• The funds are to be used in expanding AAR’s outpatient footprint and setting up of three hospitals.

Healthcare provider AAR Group will turn to international financiers for a Sh600 million loan to close a financing gap in its Sh1.28 billion ($15 million) regional expansion plan.

The company has already raised Sh680 million ($8 million) from selling 40 per cent stake to Sweden’s State-owned financier Swedfund and the World Bank’s private sector lending arm the International Finance Corporation (IFC). Each financier has put in Sh340 million ($4 million) for a 20 per cent stake ownership.

READ: AAR enters talks for sale of Sh382m stake

“We have reached the maximum that we can at this time in terms of equity funding since AAR would like to remain as a majority shareholder. With IFC and Swedfund each holding 20 per cent stake, AAR will keep hold of the remaining 60 per cent and any further funding will come in form of debt,” said the AAR managing director Mark Achola.

He spoke Tuesday during signing of the equity investment by IFC.

The funds are to be used in expanding AAR’s outpatient footprint and setting up of three hospitals.

Mr Achola said that while the company is looking across the board for the debt funding, it would most likely turn to international lenders because they offer better rates.

“Our partners, IFC and Swedfund, are international players and we are able to leverage on those relationships to attract funding at more competitive rates,” added Mr Achola.

AAR will seek to access the funding within the next one year given the immediacy of the commitments to expansion.

The health provider has 28 clinics in Kenya, Uganda and Tanzania.

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It plans to double this number, as well as step into the secondary healthcare market through the three hospitals, which will be in Mombasa, Nairobi and Kampala.

IFC director for East and Southern Africa Oumar Seydi said the international lender is looking to expand its loans into Kenya, which stand at 12 per cent of the total African IFC investments that are expected to hit $5 billion (Sh425 billion) this year.

“Given the growth of the country, we anticipate Kenya’s share of our African investments will go up to 16 per cent by 2016.

“We are mainly investing in the financial sector, infrastructure, manufacturing, agriculture and services, with the investment in AAR falling in the latter category,” said Mr Seydi.