East African Breweries Limited (EABL) will use the proceeds of its oversubscribed five-year bond issue to retire short-term debt.
The firm raised the entire Sh6 billion it was targeting from the issue, which ran between March 13 and 24, defying a recent poor run for corporate bonds that has put off firms from the market.
The bond registered an oversubscription of 41 per cent, with investors offering Sh8.45 billion.
The initial issue of the two- tranche bond had raised Sh5 billion, which the beer-maker and distiller put into capital expenditure in its plant.
It says the second issue will go towards debt restructuring, likely targeting a short-term bank overdraft it holds with Standard Chartered and Citi Bank.
“The funds from the second series (issue) will be used to restructure the company’s balance sheet, which will entail the repayment of short-term loans ensuring that EABL matches its borrowings with its medium-to-long-term capex and working capital investments,” said EABL in a statement.The brewer’s balance sheet for the six months ended December 2016 listed the Sh5.95 billion overdraft facility with the two lenders as its only current liability–meaning it is due within a year– which carries an effective interest rate of 8.96 per cent.