(NAIROBI, KENYA) – Centum Investment Company became a debt-free holding company in the year ended 31st March 2026, but borrowing risks have increased across its operating businesses, according to disclosures in its latest annual report.
The Nairobi Securities Exchange-listed firm had previously used large amounts of debt to fund expansion, at times borrowing and issuing guarantees on behalf of subsidiaries that also took on debt independently.
Group bank borrowings, which represent amounts owed by operating units, rose to KES 13.6 billion ($105.4 million / £83.2 million) in the review period from KES 12.2 billion ($94.5 million / £74.6 million) a year earlier.
More of the businesses, compared with the previous year, are struggling to repay their obligations or comply with conditions set by lenders. This has led to renegotiations with financiers.
Longhorn Publishers’ credit facility from Standard Chartered Bank Kenya increased to KES 910.2 million ($7.05 million / £5.57 million) from KES 559.5 million ($4.34 million / £3.42 million) after the company breached loan terms, including the capacity to service debt from cash flows and current assets.
“Management is actively engaging with the bank regarding the outstanding obligations, including discussions on a potential capital injection and the disposal of the charged property to reduce indebtedness and strengthen the company’s financial position,” Centum said of Longhorn’s indebtedness.
Terms tied to a $20 million credit facility from the International Finance Corporation for an affordable housing project by Centum Real Estate were also breached, with the subsidiary obtaining a waiver from the financier.
“As at 31st March 2026, the group was not in compliance with the liabilities to tangible net worth ratio covenant,” Centum said of the loan condition.
“The group obtained a formal waiver from the lender prior to the authorisation of these financial statements, and accordingly, the borrowing continues to be classified as a non-current liability.”
A breach of loan terms normally triggers the reclassification of long term loans into short term facilities, effectively requiring a borrower to settle the amount within 12 months. This is designed to protect the interests of creditors. A waiver, however, allows the borrower to keep to the original repayment schedule on the understanding that its financial position is likely to improve.
Vantage Capital, which provided a $32.3 million debt facility to Two Rivers Land Company (SEZ) Limited, waived the terms of the loan.
NCBA Bank Kenya issued a waiver to Two Rivers Power Company Limited, to which it had lent EUR 1.44 million ($1.56 million / £1.23 million). The subsidiary, which provides electricity to the Two Rivers property complex, exceeded the debt limits agreed with NCBA.
The utility also breached terms set by Grid X Duara Holdings, another creditor from which it borrowed $7 million in the form of a convertible loan.
“At 31st March 2026, Two Rivers Power Company was in breach of both covenants. As such, the borrowing facility has been classified as a current liability,” Centum said.
While the lender had an option of converting its claims into shares of the company, no such conversion had occurred by the end of the reporting period.
Centum did not report new developments on the borrowings in the subsequent events section, which captures material issues occurring after the end of the reporting period.
Some loans remain in compliance, including a $38.5 million facility from Nedbank Limited owed by Two Rivers Land Company (SEZ) Limited and a $1.9 million loan from NCBA Uganda Limited owed by Pearl Marina Estates Limited.
Centum has worked to reduce its debt burden over the years to lower risk as several operating units underperformed while liabilities, including interest expenses, increased.
The group incurred total finance costs of KES 2.19 billion ($16.97 million / £13.40 million) in the review period, up from KES 1.65 billion ($12.78 million / £10.09 million) the year before.
In the review period, Centum settled loans from Stanbic Bank Kenya and Standard Bank of South Africa, which were owed KES 690 million ($5.35 million / £4.22 million) and KES 1.32 billion ($10.23 million / £8.07 million) respectively in the prior year.
The company has relied on asset sales to raise funds for debt repayment. By eliminating debt at the holding company level, Centum has reduced the risk of subsidiaries’ indebtedness spreading to shareholders of the NSE-listed firm, which holds diverse assets.
A debt crisis at a subsidiary will be resolved using its own assets, except where the parent firm has issued guarantees.
Most bank borrowings have been secured using Centum’s real estate assets, including land and buildings worth KES 42 billion ($325.5 million / £257.0 million) at the end of the review period.
Centum recently sold a 60% stake in asset manager Nabo Capital Limited to Rock Investment Bank Limited. One of its most prominent divestitures was the 2019 sale of its ownership in local Coca-Cola bottlers for KES 19.3 billion ($149.6 million / £118.1 million). Centum previously invested heavily in listed stocks before shifting to the more capital-intensive private equity and real estate sectors using borrowed funds.