INAUGURAL

CMA approves Kenya’s first Green Bond for construction of hostels

Kenya now becomes the second country in the continent after Nigeria which tapped into the globally popular instrument in December 2017

In Summary
  • On Monday, global credit rating firm Moody's Investors Service assigned a provisional B1 global local currency rating
CMA chief executive Paul Muthaura./FILE
CMA chief executive Paul Muthaura./FILE

The Capital Markets Authority (CMA) has approved Kenya's first green bond which is expected to raise Sh5 billion to put up students' hostels.

The unlisted bond  structured as a restricted public offer will be issued by Acorn Project (Two) Limited Liability Partnership.

This follows the launch of the Policy Guidance Note on Green Bonds in February 2019.

 

The capital markets regulator said, being a restricted public offer, the Issuer will raise the funds from only targeted sophisticated investors

‘The issuance is a critical step in advancing the development of an effective ecosystem to support the establishment of green capital markets in Kenya," said CMA chief executive Paul Muthaura.

He said this is in line with the Marrakech Pledge 2016, now that the necessary legal instruments are in place to facilitate such issuance. 

The Authority was one of the pioneer signatories to the 2016 Pledge. The approval will enable the issuer to raise funds to undertake sustainable and climate resilient development.

As per the issuer’s Information Memorandum, the fixed-rate bond is certified as a green bond by Climate Bonds Initiative.

Sophisticated investors participating in the bond will benefit from a 50 per cent guarantee from Guarantco on principle and interest payments.

Muthaura said the authority will continue engaging potential issuers in order to create a pipeline of green bond issuers to match the demand and supply of green-centric capital and climate-resilient investing opportunities.

 

On Monday, global credit rating firm Moody's Investors Service assigned a provisional B1 global local currency rating to to the bond expected to part fund the construction of purpose-built student accommodation (PBSA) buildings in Nairobi and associated transaction costs.

 

"The Acorn student housing transaction is an important milestone in the development of the local capital markets for private financing. The Notes will have a bullet maturity of five years, Christopher Bredholt, a Moody's vice president and lead analyst for the Issuer said.

Kenya now becomes the second country in the continent after Nigeria which tapped into the globally popular instrument in December 2017 popular instrument, raising $30 million (Sh3.30 billion) to fund renewable energy and afforestation projects.