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 increase the amount and will now seek shareholder approval. The amount will be crucial in rescuing the company from a liquidity crunch given that its entire debt amounting to Sh4.66 billion matures before mid-2025.
The success of the rights issue will depend on the participation of major shareholders. Sanlam Kenya is 57.14 percent owned by Hubris Holdings Limited, which is wholly owned by Sanlam Limited – a South African company listed on the Johannesburg Stock Exchange.
Aksaya Investment Holdings Limited, the investment vehicle of billionaire businessman Baloobhai Patel, holds a 21.04 percent stake, followed by Peter Kingori Mwangi (1.54 percent) and Anjay Vithalbhai Patel (0.59 percent).
Sanlam Kenya wants to settle the Stanbic loan, amounting to about Sh3.1 billion, with the facility due in March next year. Another Sh1.08 billion loan due on May 5 next year is owed to Sanlam Emerging Markets – the broker’s parent company.
“The purpose of the rights issue is to raise the indebtedness of the group (which includes the company and its subsidiaries) to a more sustainable level,” the notice read in part.
“The Board unanimously believes that a rights issue is necessary and will place the company in the best possible position to implement this strategy and deliver returns to shareholders over the long term.”
The insurer paid Stanbic Sh625 million in April this year to reduce debt, which auditors said would reach Sh3.7 billion in March next year. The money used to settle the debts came partly 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 repaying the Stanbic loan, Sanlam will save about Sh577.3 million in annual interest costs, based on what it paid in the financial year ending December 2023.
The Board adds that this move will also provide 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 52.6 percent to Sh126.6 million, keeping investors without profits for a decade. However, in the half-year to June 2024, the insurer recorded a net profit of Sh282.2 million from a loss of Sh171.9 million the previous year, as investment income more than quadrupled.
The insurer’s debt position began when it secured two-year loans of $10 million (Shs1.3 billion) and $17 million (Shs2.2 billion) from Sanlam Capital Markets Property Limited in 2017 and 2018, among others, to recapitalize the insurance companies and finance Completion of Sanlam Tower.
Sanlam Kenya subsequently extended the maturity of the two loans to February 2021 by availing a Sh3 billion loan from Stanbic. the Stanbic’s loan will be restructured in 2022 In a Sh4 billion facility with a maturity date of March 2025.