East African Breweries Secures KSh 16.7 Billion in Oversubscribed Corporate Bond Offering

East African Breweries Limited (EABL), Kenya’s premier alcoholic beverages manufacturer and one of the most established companies listed on the Nairobi Securities Exchange, has successfully raised KSh 16.7 billion through a corporate bond issuance that significantly exceeded market expectations. The oversubscription demonstrates strong investor confidence in the company’s financial position and future prospects, marking a significant milestone in the brewer’s capital raising strategy.

The corporate bond offering received bids from investors totaling KSh 16,764,220,000 against an initial target of KSh 11 billion. The robust investor demand resulted in an impressive oversubscription rate of 152.4%, reflecting the attractiveness of the debt instrument’s terms and EABL’s strong reputation in Kenya’s capital markets. In response to the overwhelming investor interest, the listed brewer exercised the green shoe option, a provision that allows issuers to accommodate additional demand, thereby accepting an extra KSh 6 billion beyond the initial target.

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This successful bond issuance represents the first tranche in an ambitious capital raising plan where EABL is seeking to borrow a total of KSh 20 billion through medium-term notes, debt instruments that typically have maturities ranging from five to ten years. The phased approach to raising capital provides EABL with flexibility in managing its debt profile while gauging market conditions for subsequent tranches.

Attractive Terms Draw Investor Interest

EABL is offering successful bidders a coupon rate of 11.80% per annum for the debt instrument, which has a maturity date of November 18th, 2030. This gives investors a five-year investment horizon with predictable semi-annual interest payments. The coupon rate was carefully calibrated to attract sufficient investor demand while remaining financially viable for the company’s capital structure and operational cash flows.

When compared to the more secure Kenya Government Treasury Bonds, which are offering investors coupon rates of between 11% and 11.5% for five-year debt instruments, EABL’s bond provides an attractive premium. Investors interested in EABL’s bond enjoy an extra yield spread of approximately 30 to 80 basis points, compensating them for the additional risk associated with corporate debt compared to sovereign debt.

This premium is particularly important because EABL’s bond is unsecured, meaning it is not backed by specific collateral or assets that investors could claim in the event of default. Unsecured debt carries higher risk than secured debt because bondholders have no preferential claim on company assets if EABL were to run into financial problems that make it difficult to make interest payments on time or repay the principal at maturity. However, EABL’s strong financial performance, established market position, and robust cash generation capabilities have evidently convinced investors that the risk premium adequately compensates for this additional exposure.

Understanding Medium-Term Notes as Corporate Financing Instruments

Medium-term notes (MTNs) are debt instruments commonly used by corporations to raise funds from capital markets. These fixed-income securities are particularly attractive to institutional investors and high-net-worth individuals seeking predictable returns over a defined investment period. Unlike bank loans, which are negotiated privately with financial institutions, MTNs are issued in the capital markets and can be purchased by a broader range of investors.

The appeal of MTNs lies in their structured payment schedule and fixed returns. For investors, they provide regular income streams through periodic interest payments, making them suitable for pension funds, insurance companies, and other institutions with liability-matching requirements. For issuers like EABL, MTNs provide an alternative to bank financing, potentially at more competitive rates, while also diversifying the company’s funding sources and extending its debt maturity profile.

The Kenyan capital markets have seen increased corporate bond issuance in recent years as companies seek to tap into domestic savings and reduce reliance on bank lending. This trend has been supported by regulatory reforms by the Capital Markets Authority aimed at deepening Kenya’s bond market and providing companies with diverse financing options.

Payment Structure and Listing Details

Successful bidders in the EABL corporate bond will receive their semi-annual interest payments on May 18th and November 18th of each year up to and including the maturity date in 2030. This bi-annual payment structure is standard for corporate bonds and provides investors with regular income streams that can be reinvested or used to meet ongoing financial obligations.

The semi-annual payment frequency strikes a balance between administrative efficiency for the issuer and liquidity preferences of investors. More frequent payments would increase administrative costs, while less frequent payments might reduce the bond’s attractiveness to income-seeking investors.

The Notes will be uploaded to the Central Depository and Settlement Corporation (CDSC) accounts of successful bidders on November 20th, 2025. The CDSC operates Kenya’s automated book-entry system for securities settlement, providing secure and efficient custody services for investors. By holding the notes in electronic form through CDSC, investors benefit from reduced risks of physical certificate loss or theft, easier transfer of ownership, and streamlined corporate actions processing.

The debt instruments will be officially listed at the Nairobi Securities Exchange on November 25th, 2025. Listing on the NSE provides several benefits, including enhanced liquidity through secondary market trading, greater transparency through disclosure requirements, and potential inclusion in bond indices tracked by institutional investors. The listing also subjects EABL to ongoing disclosure obligations, providing bondholders with regular updates on the company’s financial performance and material developments.

Professional Advisory Team and Transaction Structure

The EABL Notes programme benefited from a comprehensive team of professional advisors and service providers, reflecting the complexity and importance of the transaction. Absa Bank Kenya served as the arrangers and placing agents, responsible for structuring the debt programme, coordinating the issuance process, and marketing the bonds to potential investors. Absa’s extensive institutional client relationships and capital markets expertise were crucial in achieving the strong oversubscription.

Absa Securities Limited acted as the sponsoring stockbroker, facilitating the listing process at the NSE and ensuring compliance with exchange requirements. The sponsoring broker plays a critical role in liaising with the exchange, preparing listing documentation, and maintaining ongoing compliance with listing rules.

Image Registrars Limited was appointed as the paying agent, responsible for processing interest payments to bondholders and managing the principal repayment at maturity. The paying agent ensures accurate and timely distribution of payments, maintains bondholder records, and handles inquiries from investors regarding their holdings and payments.

MTC Trust & Corporate Services Limited serves as the trustee, representing bondholders’ interests and ensuring EABL complies with the terms and conditions of the bond indenture. The trustee monitors the company’s compliance with financial covenants, holds security (if any), and can take enforcement action on behalf of bondholders if necessary. The trustee’s role is particularly important for protecting minority bondholders who may lack the resources or expertise to monitor the issuer independently.

Coulson Harney LLP, operating as Bowmans Kenya, provided legal counsel for the transaction, drafting the offering documents, advising on regulatory compliance, and ensuring the transaction structure met legal requirements. Legal advisors play a crucial role in identifying and mitigating legal risks in corporate bond issuances.

PricewaterhouseCoopers served as reporting accountants, providing assurance on the financial information included in the offering documents and ensuring compliance with accounting standards and disclosure requirements. The involvement of a reputable auditing firm enhances investor confidence in the accuracy and completeness of financial information.

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EABL’s Debt Management and Capital Structure

According to EABL Group’s Annual Report and Financial Statements for the year ended June 30th, 2025, the company’s debt position showed significant improvement compared to the previous year. The listed brewer had net borrowings of KSh 39,321,163,000, down from KSh 47,062,984,000 in 2024, representing a reduction of approximately KSh 7.7 billion or 16.4%. This substantial deleveraging demonstrates management’s commitment to strengthening the balance sheet and reducing financial risk.

The company also reported lease liabilities of KSh 2,967,793,000, up from KSh 2,603,220,000 in the previous year. These lease obligations, recognized under IFRS 16, reflect EABL’s use of leased properties and equipment in its operations. The increase in lease liabilities may indicate expansion of leased facilities or renegotiation of existing lease terms.

Bank overdrafts stood at KSh 1,180,000, down dramatically from KSh 901,419,000 in 2024, suggesting improved working capital management and reduced reliance on short-term financing facilities. The minimal overdraft balance indicates strong operational cash generation and effective treasury management.

Combining these debt components, EABL’s net debt position improved to KSh 29,544,777,000 from KSh 38,851,194,000 in 2024, a reduction of KSh 9.3 billion or approximately 24%. This improvement in the debt position, achieved before the current bond issuance, strengthens the company’s financial flexibility and reduces its cost of capital.

The decision to raise additional debt through the corporate bond, despite recent deleveraging, suggests that EABL has identified attractive investment opportunities or strategic initiatives that are expected to generate returns exceeding the cost of the borrowed funds. The relatively low cost of debt compared to equity financing, combined with the tax deductibility of interest payments, makes debt an efficient source of capital for value-accretive investments.

Strong Financial Performance Underpins Investor Confidence

At the close of its 2025 financial year, EABL recorded robust financial results that demonstrate the company’s resilience and growth trajectory in a challenging operating environment. Total revenue grew by 4% to reach KSh 128.8 billion, reflecting the company’s ability to navigate headwinds including excise tax increases, regulatory changes, and evolving consumer preferences in the alcoholic beverages sector.

The company’s earnings per share increased by an impressive 16% to KSh 11.97, significantly outpacing revenue growth. This margin expansion indicates improving operational efficiency, effective cost management, and beneficial product mix shifts toward higher-margin offerings. The stronger earnings growth relative to revenue growth suggests that EABL is successfully implementing productivity initiatives and leveraging its scale advantages.

EABL declared a dividend per share of KSh 8.00, providing shareholders with attractive returns while retaining sufficient earnings to fund growth initiatives. The dividend payout represents approximately 67% of earnings per share, striking a balance between rewarding shareholders and maintaining financial flexibility for reinvestment in the business.

The company’s net profit reached KSh 12.2 billion, providing a solid foundation for debt servicing and demonstrating the earnings power that gives bondholders confidence in EABL’s ability to meet its interest payment obligations. With annual interest costs on the KSh 16.7 billion bond of approximately KSh 1.97 billion (at the 11.80% coupon rate), the company’s net profit provides comfortable coverage, with an interest coverage ratio exceeding 6 times based solely on this debt tranche.

Market Performance and Investor Sentiment

With a market capitalization of KSh 189,785,845,440 (equivalent to approximately US$ 1,458,163,756 at prevailing exchange rates), EABL ranks among the largest companies listed on the Nairobi Securities Exchange. The substantial market capitalization reflects investor confidence in the company’s business model, competitive position, and long-term growth prospects in the East African alcoholic beverages market.

As of 2:00 PM during Thursday’s trading session, the EABL counter was trading in a range between KSh 239 and KSh 240 per share. The trading activity showed healthy liquidity, with 263,279 shares changing hands across 50 separate transactions, generating a turnover of KSh 61.87 million. This trading activity demonstrates continued investor interest in the stock and provides shareholders with liquidity to adjust their positions as needed.

The EABL share price experienced a modest decline of 0.4% during the Thursday trading session. Market analysts attributed this minor correction to inevitable profit-taking by short-term investors who had benefited from the stock’s recent appreciation. Such price corrections are normal market behavior and do not necessarily reflect changing fundamentals or negative sentiment about the company’s prospects.

The profit-taking was likely triggered by investors who purchased shares in anticipation of the successful bond issuance, viewing it as a positive catalyst that would demonstrate the market’s confidence in EABL. With the bond now successfully placed and oversubscribed, these short-term traders moved to lock in gains, creating temporary selling pressure. However, the limited magnitude of the decline suggests strong underlying demand for the stock from longer-term investors who view the bond issuance as enhancing rather than undermining the equity value proposition.

Strategic Implications and Future Outlook

The successful corporate bond issuance positions EABL to execute its strategic priorities while maintaining a balanced capital structure. The proceeds from the bond can be deployed across several potential uses, including refinancing existing debt at potentially more favorable terms, funding capital expenditure for production capacity expansion or facility upgrades, investing in distribution infrastructure to reach new markets or improve service levels, supporting working capital requirements for seasonal inventory buildup, or financing strategic acquisitions or partnerships that enhance competitive positioning.

Management’s ability to attract strong investor demand at competitive rates reflects several positive factors about EABL’s business. The company benefits from a strong brand portfolio including internationally recognized labels, dominant market positions in key East African markets, diversified revenue streams across beer, spirits, and non-alcoholic beverages, proven ability to adapt to regulatory changes and market dynamics, and robust cash generation supporting both dividends and debt servicing.

Looking ahead, EABL’s planned second tranche of the KSh 20 billion debt programme will likely depend on market conditions, the company’s utilization of the current proceeds, and its ongoing financial performance. If the first tranche proceeds are deployed effectively and generate strong returns, investor appetite for subsequent issuances should remain robust.

The company operates in a dynamic industry environment characterized by evolving consumer preferences toward premium products, ongoing regulatory developments affecting taxation and marketing, competition from both established players and new entrants, and broader economic conditions affecting disposable incomes and consumption patterns. EABL’s track record of navigating these challenges while delivering consistent financial performance provides confidence in its ability to meet its obligations to bondholders.

Significance for Kenya’s Capital Markets

The successful EABL bond issuance represents a positive development for Kenya’s capital markets more broadly. The strong oversubscription demonstrates healthy domestic liquidity and investor appetite for quality corporate paper, potentially encouraging other companies to consider bond issuances as an alternative to bank financing. The transaction also showcases the capacity of Kenyan financial institutions to structure and execute large corporate debt offerings.

For the Kenyan economy, the development of a deeper and more liquid corporate bond market provides several benefits, including better allocation of savings toward productive investments, reduced concentration of corporate lending in the banking sector, improved price discovery for corporate credit risk, and enhanced options for companies to match their funding sources with their operational needs and strategic priorities.

As EABL proceeds with the deployment of the raised capital and prepares for potential subsequent tranches of its debt programme, market participants will closely monitor the company’s execution of its strategic plans and its continued financial performance. The bond’s success sets a positive precedent and establishes EABL as a benchmark issuer in Kenya’s corporate bond market, potentially paving the way for other companies to access capital markets financing on attractive terms.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

14th November, 2025