Absa Bank Kenya #ticker:ABSA Thursday revealed it offered East African Breweries Plc #ticker:EABL (EABL) a syndicated loan of Sh18.8 billion to avoid breaching the law with the disclosure of multiple lenders not made public by the brewer in its latest annual report.
The bank said it offered EABL a Sh10.8 billion and the remaining amounts came from other lenders in Africa controlled by its parent company — Absa Group.
The revelations indicate that EABL dealt with Absa Kenya to obtain the credit facilities while the bank pooled funds from its affiliates to make the loans.
The disclosure followed a story in the Business Daily that indicated that Absa Kenya had breached the limits placed on lending to a single borrower based on reports in the EABL annual report.
EABL’s report states that the brewer has borrowed loans worth Sh18.8 billion from Absa Kenya and did not reveal other lenders that were working with the Kenyan lender to provide the credit facilities.
This suggested the bank had breached the law that requires lenders not to lend more than 25 percent of their core capital to one borrower or related borrowers in the rule known as single obligor.
Yesterday, Absa Kenya, which has a core capital of Sh46.3 billion, said it did not breach the rule.
“Absa Bank Kenya Plc, as one of the principal bankers of East African Breweries, has approved total facilities amounting to Sh10,872,500,000, to EABL; which amount is within our current single borrower limit of Kes.11,214,103,250,” the bank said in a statement.
“In view of the foregoing Absa Bank Kenya PLC is not in breach of single borrower limit regulations.”
The bank added that the balance of the loans came from its affiliates in Africa but did not name them.
The loans Absa Kenya and its sister banks disbursed to EABL include an Sh11 billion unsecured facility which matures in July 2022 and has an interest rate of 10.3 percent.The lenders also gave the brewer Sh4.8 billion without security at an interest rate of eight percent. The loan is repayable in 12 quarterly instalments of Sh400 million beginning July 2022.Another Sh3 billion loan from the banks maturing in December 2026 was taken at an effective interest rate of eight percent and is secured by the brewer’s parent firm Diageo which issued a letter of comfort.The banks also provided EABL with the Sh6 billion it used to repay its corporate bond of a similar value in June – […]