EABL prices Sh11bn par­ent loan on old bankers’ for­mula

Brewer says the debt at­tracted an in­ter­est charge of two per­cent­age points above the KBRR

Business Daily (Kenya) - - CORPORATE NEWS -

Vic­tor Juma

East African Brew­eries Lim­ited (EABL) has pegged a Sh11.4 bil­lion loan from its par­ent firm Di­a­geo Plc on the Kenya Bankers’ Ref­er­ence Rate (KBRR) which was dis­con­tin­ued last year, put­ting the pric­ing of the debt in limbo.

The firm, listed on the Nairobi Se­cu­ri­ties Ex­change, says in its lat­est an­nual re­port for the fi­nan­cial year ended June 2017 that the loan at­tracted an in­ter­est charge of two per­cent­age points above the KBRR.

The us­age of the KBRR as a sig­nalling rate was how­ever dis­con­tin­ued by the Cen­tral Bank Kenya (CBK) in Jan­uary this year

The us­age of KBRR as a sig­nalling rate was dis­con­tin­ued by the CBK in Jan­uary this year

EABL bought Sabmiller’s 20 per cent stake in KBL.

after the sign­ing into law of in­ter­est rate con­trols based on the Cen­tral Bank Rate (CBR).

The brewer in the pre­vi­ous year paid in­ter­est to Di­a­geo, through the UK multi­na­tional’s sub­sidiary Di­a­geo Fi­nance Plc, at 1.5 per­cent­age point above the 364-day T-bill rate.

“The re­lated party loan is­sued *Brewer paid an in­dica­tive rate of 10.9 pc in 2017 %

*KBRR sus­pended in Jan­uary in 2012 at­tracts vari­able in­ter­est rates at two per cent above Kenya Bankers’ Ref­er­ence Rate at which the KBRR was last set be­fore the ad­vent of the law cap­ping rates

(KBRR) (2016: 1.5 per cent above the 364 day Trea­sury Bill rate),” EABL said in the re­port.

The brewer did not say what im­pact the KBRR’S sus­pen­sion — in the mid­dle of the fi­nan­cial year— had on the re­vised loan terms.

KBRR was last set at 8.9 per cent, in­di­cat­ing that the brewer was pay­ing in­ter­est on the loan at 10.9 per cent in the re­view pe­riod.

While the bank­ing sec­tor reg­u­la­tor may have sus­pended KBRR for of­fi­cial use, non-bank pri­vate par­ties could adopt it to price credit among them­selves since all the in­puts are public in­for­ma­tion in­cor­po­rat­ing bench­mark risk-free rates.

KBRR is com­puted as an av­er­age of the CBR and the twom­onth weighted mov­ing av­er­age of the 91-day T-bill to cap­ture the mon­e­tary pol­icy stance and the min­i­mum re­turn re­spec­tively.

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