Fundraise from the public, NSE boss tells corporates

There is renewed confidence in the country's private bond

In Summary
  • EABL's bond was oversubscribed by 275%
  • There were only six outstanding commercial papers valued at Sh19.1 billion by end of last year  
CMA CEO Wycliffe Shamia, Absa CEO Jeremy Awori, Group MD and CEO EABL, CMA Chairman Nicholas Nesbitt and NSE CEO Geoffrey Odundo during the bell ringing ceremony to commemorate EABL MTN listing at the exchange building Nairobi on November 1

Corporates have been asked to ride on investors' renewed confidence in private bonds to raise capital and expand businesses.

Speaking at the listing of East African Breweries Medium-Term Note worth Sh11 billion, Nairobi Securities Exchange CEO  Geoffrey Odundo said that the overall size of the debt capital markets in Kenya stands at $26.6 billion (2.95 trillion). 

He added that Sub-Saharan Africa is sitting on about $300 billion (over Sh30 trillion) worth of capital markets debt potential. 

"While the corporate bond market is nascent, the sovereign debt market has been on a growth trajectory accounting for about 75 per cent of the total outstanding amount,'' Odindo said. 

He added that the performance of the EABL’s MTN is instrumental in the revival of the corporate bond market.

The secondary listing of EABL's bond follows an overwhelming subscription.

Last week, EABL said its Sh11 billion issue was oversubscribed by more than threefold. Investors bid a total of Sh37.9 billion in the issuing round, EABL said, representing an oversubscription of 275 per cent.

The five-year, fixed-rate instrument is offered at an interest rate of 12.25 per cent payable semi-annually.

The offer was opened on October 6 and closed on October 21 and is now listed for trading on the NSE.

EABL’s Medium-Term Note will be the biggest of the issued corporate bonds and commercial papers in the Kenyan market. It was arranged by Absa Bank Kenya Plc and Absa Securities Limited.

The funds will be used to finance investments in expanding production, repay debts taken in the ordinary course of business refinance short-term borrowings and provide working capital.  

EABL Group MD  Jane Karuku described the Note as the company’s most successful capital-raising issue and the reception as an expression of confidence in the company’s strategic vision.

“Although we at EABL have been in the capital markets before, this was a different time to ask for money – given the prevailing economic conditions, especially relating to the Covid-19 pandemic,'' Karuku said.

She said the issue attracted an impressive mix of individual and corporate investors, with individual and retail investors comprising 32 per cent of applicants while institutional investors covered the rest.

This signals renewed investor confidence in the previously troubled local bond market that somehow took a backward step in active issuance after investors lost money after the collapse of  Chase and Imperial banks in 2015 and 2016.

Other firms that have defaulted on their bonds include ARM Cement and Nakumatt Holdings. 

Most of the issuers redeemed their bonds and opted for alternative sources of funds including loans from banks, shareholders, private equity and development finance institutions.

As at the end of December 2020, there were only six outstanding commercial papers valued at Sh19.1 billion, according to the Capital Markets Authority’s quarter one 2021 statistical bulletin.

The transaction was arranged by Absa Bank Kenya Plc and Absa Securities, with Bowmans Kenya as the legal counsel and Image Registrars the registrar and paying agent.

''The success of the bond has helped to deliver a clear message that is much needed right now: that we are a strong resilient market with the ability to bounce back from global economic shocks and build back better,'' Absa Kenya boss Jeremy Awori said. 

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