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Absa Kenya defends 18.8 billion shillings EABL loan


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Absa Kenya defends 18.8 billion shillings EABL loan


Absa Headquarters in Westlands, Nairobi. PHOTO FILE | NMG

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Summary

  • Absa Bank Kenya revealed on Thursday that it offered East African Breweries Plc (EABL) a syndicated loan of 18.8 billion shillings to avoid breaking the law with the disclosure of several lenders not made public by the brewer in its latest annual report. .
  • The bank said it offered EABL 10.8 billion shillings with the remaining amounts coming from other lenders in Africa controlled by its parent company, the Absa Group.
  • The revelations indicate that EABL dealt with Absa Kenya to obtain the credit facilities while the bank pooled funds from its subsidiaries to provide the loans.

Absa Bank Kenya #ticker: ABSA on Thursday revealed that it offered East African Breweries Plc #ticker: EABL (EABL) a syndicated loan of 18.8 billion shillings to avoid breaking the law with the disclosure of several undisclosed lenders by the brewer in its last annual report.

The bank said it offered EABL 10.8 billion shillings with the remaining amounts coming from other lenders in Africa controlled by its parent company, the Absa Group.

The revelations indicate that EABL dealt with Absa Kenya to obtain the credit facilities while the bank pooled funds from its subsidiaries to provide the loans.

The disclosure follows an article in the Business Daily which stated that Absa Kenya had violated limits on single borrower lending based on reports in EABL’s annual report.

The EABL report states that the brewer borrowed loans worth 18.8 billion shillings from Absa Kenya and did not disclose other lenders who were working with the Kenyan lender to provide the credit facilities.

This suggested that the bank had broken the law that requires lenders not to lend more than 25% of their capital base to a borrower or borrowers bound in the rule known as a single debtor.

Yesterday, Absa Kenya, which has a capital base of 46.3 billion shillings, said it was not breaking the rule.

“Absa Bank Kenya Plc, as one of the main bankers of East African Breweries, has approved total facilities amounting to Sh 10,872,500,000 to EABL; the amount of which is within our current single borrower limit of Kes 11,214,103,250, ”the bank said in a statement.

“In view of the above, Absa Bank Kenya PLC is not in violation of the Single Borrower Limit regulations. “

The bank added that the balance of the loans came from its subsidiaries in Africa but did not name them.

Loans that Absa Kenya and its sister banks have made to EABL include an 11 billion shilling unsecured facility which matures in July 2022 and bears interest at 10.3%.

The lenders also gave the brewer 4.8 billion shillings unsecured at an interest rate of eight percent. The loan is repayable in 12 quarterly installments of 400 million shillings from July 2022.

Another 3 billion shillings bank loan maturing in December 2026 was taken at an effective interest rate of eight percent and is guaranteed by the parent company of brewer Diageo who issued a comfort letter.

The banks also provided EABL with the 6 billion shillings it used to repay its corporate bond of a similar value in June – earlier than the expected due date of March 2022. It was not clear whether the 6 billion shillings loan was still outstanding.


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