Old Mutual Group Holdings has put its Old Mutual Tower in Upper Hill, Nairobi, up for sale due to rising debt service costs.
According to disclosures made on Monday, the firm’s shareholders will approve the sale and transfer of the office building at its Annual General Meeting on November 14.
The sale of the 31-storey office tower comes amid rising debt servicing costs, prompting the insurer to restructure its balance sheet to include the conversion of shareholder loans into preference shares.
The company valued the 324,881 square-foot tower, which also serves as its headquarters, at Sh5.5 billion in the fiscal year ended December 2022, maintaining the carrying value of the investment property from 2021.
Old Mutual Tower is the firm’s largest investment property, followed by Uganda’s Nakawa Business Park, South Sudan Equatorial Tower, and the Equity Centre, which serves as the lender Equity Group’s headquarters.
The sale of the tower at its carrying value would reduce the group’s investment property portfolio, which stood at Sh19.2 billion at the end of 2022.
Old Mutual has been under pressure due to years of loss-making and increased borrowing, which has exposed the company to higher finance costs.
However, in the six months to June 2023, the financial services provider reduced its half-year loss by more than half to Sh348 million, from a larger loss of Sh1.1 billion the previous year. Nonetheless, finance costs nearly doubled due to rising interest rates and a depreciated local currency.
“Finance costs on borrowings were up 96 percent over the same period in 2022 due to increased interest rates as well as forex losses on the portion of the debt that is US dollar-denominated,” the company said.
“The Libor, on which interest is determined for US dollar loans, moved from 0.59 percent in June 2022 to five percent in June 2023 while the Kenya shilling depreciated by 14 percent against the US dollar over the same period.”
Finance costs increased to Sh1.8 billion from Sh937 million previously, as the pool of borrowed funds increased to Sh15.7 billion from Sh14.4 billion in December 2022.
For future growth, the company continues to bet on providing a wide range of financial services to customers.
“Our strategy is focused on delivering our integrated financial services offering to meet all of our customers’ financial needs under one roof. This will enhance our customer experience and improve productivity or our distribution channels in the various markets we operate,” the company added.
At the AGM next month, Old Mutual shareholders are also expected to vote on the conversion of shareholder loans into preference shares.
