Old Mutual Group Holdings has placed the Old Mutual Tower in Upper Hill for sale with a price tag of Kshs 5.5 billion. According to the insurer, this is due to the rising debt service costs.
The sale of the iconic tower was announced in a notice to shareholders on October 30th.
“Finance cost on borrowing were up 96 percent over the same period in 2022 due to increased interest rates as well as forex losses on the portion of debt that is US dollar dominated,” Old Mutual disclosed to their shareholders.
Further, the higher debt servicing costs have seen Old Mutual Group seek to restructure its balance sheet to include the conversion of shareholder loans into preference shares. This is in a bid to reduce the debts suffered by the insurer.
Preference shares are hybrid securities normally issued by companies seeking to raise capital. They imply that the preference shareholders will receive dividends on issuance by the company and mostly, are prioritized in the issuance of shares from the common shareholder.
About the Old Mutual Tower
The sale of the tower will have an impact on the company’s portfolio. Notably, the company’s asset portfolio stood at Kshs19.2 billion at the end of 2022.
Additionally, the company valued the 163metre tower at Ksh5.5 billion at the end of 2022, maintaining the carrying value of the investment property from 2021.
The Old Mutual Tower is nestled in the Upper Hill area of Nairobi
It became the tallest building in Nairobi when it opened in July 2016 after more than five years of construction.
It stands at an altitude of 5,700 feet above sea level.
Moreover, the 33-storey building offers some 300,000 square feet of Grade A office space in Nairobi’s fastest growing commercial district.
Its construction was inspired by the Empire State Building in downtown New York.
Notably, the building occupies an impressive 2.15-acre space and has an observation deck that offers a 360-degree view of Nairobi from its observation deck.
Old Mutual’s Financial Woes
The Old Mutual Group has in recent times been struggling with debt servicing due to the depreciating shilling.
Notably, the Kenyan shilling has been on a free fall for the entire year. Currently, the US dollar is selling at an average of Kshs 155 in major banks country wide.
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The Governor of the Central Bank of Kenya, Kamau Thugge blamed the strengthening dollar due to policy tightening implemented by major economies.
Dr. Thugge made the remarks when he appeared before the Departmental Committee on Finance and National Planning on October 24.
“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,” Old Mutual cited in the notice released to shareholders further noting the impact of the depreciating shilling on the insurer’s financial situation.
Tax cuts also to blame for losses
Additionally, tax cuts by the Kenya Revenue Authority on the company have affected its profits.
In 2022, the insurer issued profit warnings to shareholders citing a writing off deferred tax assets and a significant increase on the corporate tax expenses on the investment company
“The board brings to the attention of the public that the earnings for the current financial year are expected to be lower by at least 25 per cent than the earnings reported for the same period in 2021,” the company said in a statement at the end of 2022.
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However, in September 2023, Old Mutual Holdings Plc was able to grow its revenue by 12 per cent to Ksh1.8 billion in the first six months of the year, cutting losses to Ksh348 million.
Additionally, the diversified gross earnings for the year grew to Ksh0.2 billion compared to a Ksh0.9 billion loss in the corresponding half of 2022.
