- The state-owned mortgage financier issued Sh1.4 billion in January but received offers worth Sh8.1 billion.
- All five corporate bonds issued in past two years have been oversubscribed
The Nairobi Securities Exchange (NSE) sees a positive outlook for the private bond market in Kenya, urging investors to seize the opportunity to reap dividends.
Speaking at the official launch of trade on Kenya Mortgage Refinance Company PLC (KMRC) bond at the bourse, NSE CEO Geoffrey Odindo said all corporate bonds issued in the past two years have been oversubscribed.
“KMRC now adds onto the list of four private bonds including Acorn, Centum, Family Bank, East African Breweries Limited (EABL) that were well received in the market in past two years,” Odindo said.
The first tranche of KMRC’s Sh10.5 billion unsecured Medium-Term Note (MTN) was last month oversubscribed by 480 per cent.
The state-owned mortgage financier issued Sh1.4 billion in January but received offers worth Sh8.1 billion.
The proceeds raised will enable KMRC to blend its inventory of concessional funds and scale up operations, as it seeks to continue to refinance home loans and make them affordable and within reach for more Kenyans.
Cabinet Secretary National Treasury Ukur Yatani revealed that KRMC has successfully disbursed over Sh2 billion to the primary mortgage lenders to refinance mortgages while there’s an additional Sh7 billion which is currently being processed.
Yatani said that the firm is a collaboration between the government and the private sector to play a key role in the affordable housing pillar under the big four agenda.
“KRMC serves as a secure source of funding at attractive rates to increase the number of qualified borrowers and results in the expansion of the primary mortgage market and homeownership in Kenya,” Yatani said.
The firm is resolving the asset maturity mismatch that has been blamed for high-interest rates. The company mobilises long-term funds, which it then on- lends to participating lenders, which include commercial banks, savings and SACCOs and microfinance institutions.
The lenders are then able to match the maturities of the long-term credit available to them from KMRC with the home loans they offer to borrowers, resulting in lower interest rates, hence driving affordability.
According to KMRC CEO Johnstone Oltetia, the bond is a strategic landmark issue, and the investor response demonstrates a vote of confidence in the company's strategic direction.
“Today, we firmly establish our entry into the local capital markets for the core purpose of sustainably raising long-term funding for the company’s operations,” Oltetia said.
He added that building a bankable and tenable long-term capital is at the core of the firm’s strategic plan and objective to make housing affordable.
Capital Market Authority Chief Executive officer Wycliffe Shamiah termed the KMRC’s listing as a major milestone that positions the capital markets as a source of funding to support productive economic activities.
Similar sentiments were shared by NSE chairman Kiprono Kittony who congratulated KMRC for attaining the highest subscription.
“This is a major milestone not only for the company but for the exchange as well, given its unique structure and the target sector it will support. It is also the first issuance for the year 2022,” Kittony said.
Since it received its operating license from the Central Bank of Kenya (CBK) in September 2020, KMRC has relied exclusively on concessional funds from the World Bank and the African Development Bank (AfDB), the continental development finance institution (DFI), for long-term capital.
It has so far accessed Sh6.5 billion from the two DFIs through the National Treasury and refinanced qualifying home loans from participating PMLs with rates on the refinanced loans coming down to single digits (below 10 per cent), materially lower than previous average rates of 12 per cent.
The country has in recent times demonstrated improved issuer and investor confidence in the bond market with the recent oversubscription of 245 per cent in the EABL medium-term notes listed at the Nairobi Securities Exchange (NSE) in November last year.
CMA approved an issuance to raise Sh11 billion, but applications were received for nearly Sh38 billion.
Other private bonds issued last year include the Centum Investments Company Plc Sh4 billion medium-term notes, and the Sh8 billion multi-currency Family Bank medium-term note, which recorded an oversubscription of 147 per cent.