Sanlam Kenya plans to raise Sh3.25 billion from its shareholders to settle a Stanbic Bank Kenya loan and rescue the company from liquidity challenges.
The insurer said in a notice that its board approved the rights issue on November 13 to raise the amount and will now be seeking the approval of shareholders. The amount will be crucial in saving the firm from a liquidity squeeze given that its entire Sh4.66 billion debt is maturing before mid-2025.
The success of the rights issue will be dependent on major shareholders’ participation. Sanlam Kenya is 57.14 percent owned by Hubris Holdings Limited, which is fully owned by Sanlam Limited—a South African company listed on the Johannesburg Stock Exchange.
Aksaya Investment Holdings Limited, which is the investment vehicle of billionaire businessman Baloobhai Patel, holds 21.04 percent stake, followed by Peter Kingori Mwangi (1.54 percent) and Anjay Vithalbhai Patel (0.59 percent).
Sanlam Kenya wants to settle a Stanbic loan, which stands at about Sh3.1 billion, with the facility maturing in March next year. Another Sh1.08 billion loan that is maturing on May 5 next year is owed to Sanlam Emerging Markets— the intermediate parent company.
“The purpose of the rights issue is to bring the group’s (comprising the company together with its subsidiaries) indebtedness to a more sustainable level,” said the notice in part.
“The board unanimously believes that the rights issue is necessary and will put the company in the best possible position to deliver this strategy and returns to shareholders over the long-term.”
The insurer paid Stanbic Sh625 million in April this year to reduce the debt, which auditors had said was going to hit Sh3.7 billion in March next year. The funds used to partially settle the debt came from a Sh400 million dividend received from its subsidiary, Sanlam Life Insurance and Sh225 million from the sale of investments in Family Bank shares earlier this year.
By paying off the Stanbic loan, Sanlam will save about Sh577.3 million in annual interest costs, based on what it paid in the financial year ended December 2023.
The board adds that the move will also provide the management with operational and financial flexibility to drive the group’s growth ambitions and return it to profitability.
Sanlam Kenya’s net loss last year widened by 52.6 percent to Sh126.6 million, keeping investors without a dividend for a decade. However, at half-year ended June 2024, the insurer posted a Sh282.2 million net profit from Sh171.9 million loss a year earlier as investment income more than quadrupled.
The insurer’s debt situation started when it tapped two-year $10 million (Sh1.3 billion) and $17 million (Sh2.2 billion) loans from Sanlam Capital Markets Property Limited in 2017 and 2018 to, among other things, recapitalise the insurance businesses and finance completion of the Sanlam Tower.
Sanlam Kenya then extended the maturity of the two loans to February 2021 by tapping a Sh3 billion loan from Stanbic. The Stanbic loan was restructured in 2022 into a Sh4 billion facility with a March 2025 maturity date.
