EABL to clear Ksh.6 billion corporate debt

Brewer East African Breweries Limited (EABL) has announced the early redemption of its Ksh.6 billion corporate bond.

The manufacturer says the early redemption which includes the payment of accrued interest will be effected on June 28.

The early redemption is part of a rising trend that has seen firms retire their debt earlier to save on interest costs.

At the same time, the early recall to the medium term notes (MTNs) allows entities to re-borrow at a cheaper rate if prevailing market rates move downwards.

Other firms to make the early recall have included Acorn Holdings which switched its Ksh.2 billion corporate debt to development and investment trust units.

The early redemption of EABL’s bond will have the net effect of draining the corporate bond segment at the Nairobi Securities Exchange (NSE) following redemption made by Centum and Family Bank in recent months.

According to an analysis of corporate bonds data from the Capital Markets Authority (CMA), the value of outstanding commercial paper is expected to slump below Ksh.10 billion from Ksh.19.1 billion at the end of 2020.

The remaining papers whose outstanding value is estimated at Ksh.7.1 billion includes Ksh.4.8 billion and Ksh.1.3 billion by Chase Bank and Real People, entities which have already defaulted on payments.

Without a cover on corporate bond issues, both investors and companies have stayed off the market segment cognizant of the risks presented.

In 2020, Ksh.691.9 billion was traded on the secondary bonds market. However, corporate debt represented a mere 0.2 per cent of the turnover of an equivalent Ksh.1.2 billion with investors favoring ‘safe haven’ government bonds.