This archive report was first published on 23 July 2019.
On July 22, 2019, UAP Holdings, a Kenyan insurer, redeemed its corporate bond with a Sh2 billion loan from Stanbic Bank, a move that is expected to significantly reduce its finance costs.
According to sources familiar with the insurer's financing activities, Stanbic Bank provided the entire amount required to redeem the bond.
UAP had earlier stated its intention to take a bank loan to retire the bond but did not disclose the identity of the lending institution.
By refinancing the bond, UAP will now pay interest on a reducing balance rather than on a fixed basis, as was the case when the bond was outstanding.
Interest rates charged by commercial banks, including Stanbic, are currently capped at 13 percent, matching the rate at which the corporate bond was priced when it was issued in July 2014.
UAP issued the bond to finance its expansion and working capital requirements. The insurer also plans to take another bank loan to settle a Sh3.1 billion loan from South Africa-based Nedbank, which falls due next year.
Old Mutual, UAP's parent company, has agreed to extend the maturity of its short-term loans to UAP and give other creditors a higher claim on the insurer's assets.
