Equity Group eyes Sh50bn long-term debt in three years

Equity Group #ticker:EQTY is eyeing up to Sh50 billion from international financiers in the next three years as it seeks to boost its liquidity and capital positions.

Group CEO James Mwangi told investors in a recent virtual annual general meeting that the board wants to reinforce the lender’s liquidity and capital positions through a mix of medium-term and long-term debts.

This will take the group’s borrowed funds beyond the Sh56.7 billion it has in its books at the end of December 2019. Borrowing stood at Sh45.1 billion in the preceding financial year.

“We anticipate we shall be able to get up to Sh50billion of liquidity through debts as it was demonstrated by World Bank releasing Sh5 billion to help us support SMEs,” said Mr Mwangi.

Equity’s Sh22.89 billion loan or about 40 per cent of its current borrowings will mature by March 2023, the information in its latest annual report shows.

The Kenyan banking subsidiary of Equity Group is in line to receive a $50 million (Sh5.3 billion) loan from International Finance Corporation (IFC), the private sector arm of the World Bank.

The IFC money, a senior debt, will be used for onward lending to small businesses hurt by the global Covid-19 pandemic.

Equity has taken a cash preservation strategy in the wake of Covid-19, including recalling Sh9 billion in dividends and dropping the purchase of four banks outside Kenya.

“Forfeiture of dividends was a good gesture to all our partners that we are also in need as we called on them to support our customers,” Mr Mwangi told investors.

He said the bank had taken a proactive management strategy of preserving capital and liquidity as the group anticipates Covid-19 and its impact to last for at least 18 months.

Equity had borrowed a cumulative Sh17.4 billion from IFC as of December 2019, making it the largest lender to the group.

The upcoming credit line will raise the total to Sh22.7 billion.

Other top lenders include the African Development Bank (Sh10.7 billion), KFW Deg (Sh10.4 billion), ResponsAbility (Sh2.56 billion) and European Investment Bank (Sh2.34 billion.)

Local banks are increasingly taking substantial loans from global funds such as the IFC, European Investment Bank and Agence Française de Développement, attracted by relatively more favourable terms of the debt including lower interest rates and longer maturity.