Kenya Power breaches loan terms of 60 billion shillings

Kenya Power #ticker: KPLC has breached the conditions attached to its short and long-term loans for 59.96 billion Sh; This suggests a severe lack of liquidity at the state-owned electricity distributor.

The company, whose total borrowings amounted to 113 billion shillings at the end of June, breached the long-term debt covenants of 49.99 billion shillings. of a short-term debt of 9.98 billion shillings, prompting the auditor general to qualify its financial statements.

During the year ended June 2018, its current ratio – a measure of the liquidity of a company's ability to pay short- and long-term obligations – fell below the ratio of 1: 1 set by lenders when renting their loans. It sank in a negative working capital of 51.6 billion shillings.

In breach of the debt covenants, it was likely to be forced to reclassify all of its debt in 59.96 billion shillings as short-term loans in order to repay it within 12 months.

However, it was temporarily waived by the lenders, which saved it from a move that would have put it on the margin path given the negative position of the investment fund. rolling.

"After the close of the fiscal year, the company received letters from lenders waiving their right to demand payment due to the violation of the debt covenants, even though the company did not have an unconditional right to defer payment by June 30, 2018, "notes Ouko. .

The company has not yet published its full annual report for 2018. However, last June, it had contracted commercial loans worth Sh 73.8 billion and loans on loan of 48.2 million. billion Sh.

Commercial borrowings were contracted from Standard Chartered Bank #ticker: SCBK (51.48 billion shillings), Equity Bank #clicker: EQTY (7.38 billion shillings), First Rand Bank (10.89 billion shillings) and Stanbic Bank (2.88 billion shillings).

Loans have been secured by negative commitment letters.

A negative pledge clause prevents the borrower from using the same assets to secure another debt security, particularly if this could compromise the lender's security.