After many years, Centum Investment Company became a debt-free holding company in the year ended March 2026.
The Nairobi Securities Exchange-listed firm had used large amounts of debt to fund its expansion, sometimes borrowing and issuing guarantees on behalf of subsidiaries which also contracted debt on their own in some cases.
While the holding company became debt-free, the risk of debt has grown in the portfolio companies according to disclosures in Centum’s latest annual report.
The group’s bank borrowings-representing amounts owed by the operating units-rose to Sh13.6 billion in the review period from Sh12.2 billion a year earlier.
More of the businesses-compared to the prior year-are struggling to repay their obligations or comply with conditions set by the financiers.
This has resulted in renegotiations with lenders.
Longhorn Publishers’ credit facility from Standard Chartered Bank Kenya, for instance, increased to Sh910.2 million from Sh559.5 million as the company breached the loan terms including the capacity to service its debt from cash flows and current assets.
‘Management is actively engaging with the bank (StanChart) 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.
The terms tied to a $20 million credit facility from the International Finance Corporation (IFC) for an affordable housing project by Centum Real Estate were also breached, with the subsidiary obtaining a waiver from the financier.
‘As at 31 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 [long term] liability.
Breach of loan terms triggers the reclassification of long term loans into short-term facilities, effectively demanding that a borrower settles the amount within 12 months.
This is designed to protect the interest of creditors. A waiver, however, allows the borrower to stick 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 1.44 million euros. 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 31 March 2026, Two Rivers Power Company was in breach of both covenants. As such, the borrowing facility has been classified as a current liability [payable in the short term],’ 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.
The Nairobi Securities Exchange-listed firm did not report new developments with regard to the borrowings in the subsequent events section which captures material issues occurring after the end of the reporting period (March 2026).
Some of the loans are 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 been attacking the debt problem over the years to de-risk the business as several of the operating units underperformed while the liabilities including interest expenses piled up.
The group incurred total finance costs of Sh2.19 billion in the review period, up from Sh1.65 billion the year before.
In the review period, Centum settled loans from Stanbic Bank Kenya and Standard Bank of South Africa which were owed Sh690 million and Sh1.32 billion respectively in the prior year.
The company has relied on asset sales to raise funds for the debt repayment efforts. By eliminating debt at the holding company level, Centum has reduced the risk of the subsidiaries’ indebtedness spreading to owners 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 of the bank borrowings have been secured using Centum’s real estate assets including land and buildings worth Sh42 billion at the end of the review period.
Centum recently sold a 60 percent 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 the local Coca-Cola bottlers for Sh19.3 billion.
Centum previously invested heavily in listed stocks before pivoting to the more capital-intensive private equity and real estate using borrowed funds.