EABL debt to top Sh30bn after Stanbic Bank loan

EABL chairman Charles Muchene (left) and finance director Gyuri Geiszl at a past function. PHOTO | Jeff Angote | NMG 

By MUGAMBI MUTEGI

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Summary

• The new facility from the Standard Bank Group, of which about Sh2 billion has already been drawn, is set to add up onto EABL’s net loans which stood at Sh25.9 billion as at December 31.
• The loan has already caused EABL’s finance costs to rise 29 per cent to Sh2 billion in the six months to December, from the Sh1.5 billion the business closed the last financial year.

East African Breweries Limited (EABL) move to secure a Sh12.5 billion long-term loan from Standard Bank Group to build a Senator Keg plant could see its total debt top the Sh30 billion mark.

The fresh loan from the Standard Bank Group, of which about Sh2 billion has already been drawn, is set to add up onto EABL’s net loans which stood at Sh25.9 billion as at December 31.

The regional brewer in its Friday announcement of the fresh loan did not disclose the maturity period or the applicable interest rate, but said restructuring of its balance sheet to predominantly consist long-term facilities will raise its finance costs.

This new loan has already caused EABL’s finance costs to rise 29 per cent to Sh2 billion in the six months to December, from the Sh1.5 billion the business closed the last financial year.

“We managed to secure a Sh12.5 billion long-term facility,” said Gyuri Geiszl, EABL’s Finance Director. “We have just drawn down a small portion since the project has just started. As we move along, we shall generate the cash flow to fund the remaining portion.”

The regional brewer says the South Africa-based lender has committed to advance the business Sh7.5 billion with Stanbic Holdings, its Kenyan subsidiary, funding the balance.

EABL, which is 50.02 per cent owned by multinational brewer Diageo, says it will pump Sh2.5 billion of its own cash into the Sh15 billion factory whose construction is expected to be complete by July 2019.

The brewer’s annual statement shows it closed its full-year to June 2017 with total borrowings of Sh28.07 billion, an increase of Sh1.4 billion from the previous year.

READ: EABL secures Sh12.5bn loan for Kisumu plant

Stanbic Holdings

has been one of EABL’s principal bankers, supporting other capital intensive projects alongside Barclays Bank of Kenya , Standard Chartered Bank , Citibank and Equity

.

The lender has in the past relied on soft loans from its parent Diageo to fund mega projects.

EABL, which owed its parent company Sh11.5 billion as at June 2017, most likely considered this funding route for the Kisumu brewery before settling on Standard Bank.

“Six months ago, we had a couple of ideas on how we were going to fund the Kisumu brewery, but we eventually settled on debt,” Mr Geiszl said without disclosing the dropped options.

READ: Slower Kenya business, higher costs drag EABL net profit to Sh4.95 bn

Construction of the upcoming factory, which sits on land occupied by defunct EABL brewery, commenced in July with its projected annual production capacity being 100 million litres.