NCBA Bank Kenya Takes Over KSh 860 Million Loan from Absa Bank for Unga Group

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NCBA Bank Kenya has acquired a KSh 860 million loan previously issued by Absa Bank Kenya to Unga Group, the listed milling company. The loan, which was initially set to mature in June 2024, was part of a six-year financing arrangement issued in 2017 to support the construction of a new wheat milling plant in Eldoret.

The new facility from NCBA comes with a higher interest rate compared to the original terms from Absa. NCBA’s loan is charged at the Central Bank Rate (CBR) plus a 6.35% margin, compared to Absa’s rate of CBR plus a 3% margin.

According to Unga Group’s latest annual report, the company’s bank loans doubled during the financial year ended June 2024, rising to KSh 2.3 billion from KSh 1.1 billion in 2023, driven by prevailing high-interest rates.

“The facility taken over by NCBA from Absa Bank comprised a six-year term loan of KSh 860 million taken in 2017 to finance the purchase and construction of a new wheat milling plant in Eldoret,” Unga Group stated in the report.

Additionally, Unga Group holds a composite financial arrangement with NCBA Bank that includes facilities in both US dollars and Kenyan shillings. These include overdrafts, invoice discounting, bank guarantees, stock loans, letters of credit, and post-import financing, amounting to KSh 530.2 million.

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Despite these financing activities, Unga Group reported a reduced net loss of KSh 669.6 million for the year ended June 2024, down from the KSh 959.4 million loss reported in the previous year. The improved performance was attributed to reduced finance costs, a narrowed operating loss, and the strengthening of the Kenyan shilling.

This development follows the company’s recent disclosure that it paid KSh 13.25 million to its former managing director, Joseph Choge, as compensation for the termination of his contract during the same financial year.