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HF upbeat as bond issue wraps up

NAIROBI, Kenya, Sep 30 – Just a day to the closure of the Sh5b Housing Finance (HF) bond issue, the mortgage lender has expressed satisfaction with the way the transaction is proceeding.

Although he could not give an update of the bond’s figures as at Thursday, Managing Director Frank Ireri said they were witnessing a lot of interest from retail investors who wanted to take up the issue.

“We are seeing a lot of individual investor interest and knowing that the big investors will come in today (Thursday) and tomorrow is very exciting. So we are very confident and very happy with the progress,” he enthused.

The bond opened on September 20 and has a fixed interest rate of 8.5 per cent per annum and a floating rate pricing which will be pegged at 3 percent above the 182-day Treasury Bill.

The results from the transaction whose lead arrangers are the Standard Chartered Bank Limited and NIC Capital Limited will be announced towards the end of next week, after the data has been reconciled, the MD said.

The offering which matures in seven years is the first tranche of a Sh10 billion bond with the other two issues of Sh3 billion and Sh2 billion expected to be floated before 2013.

Proceeds from this transaction will be used to finance ongoing development as well as lending to potential home owners.

“We have a pipeline of over Sh4 billion worth of projects but in different phases. Some are near completion, some are starting and others are in the middle. So some of the money is definitely going to finance that; the other side of the business is the mortgage finance side,” he added.

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The bond issue, he further added is an effort to diversify their funding avenues which is part of their risk management strategy. The mortgage lender’s core capital, deposits and short term borrowing make up the mix of the different sources of financing that they intend to exploit to cushion themselves from the risks that long term lending portends.

“Our goal is to have 60 percent deposits and 40 percent (of) other funds. So this bond is just the beginning of a journey to start getting to that balance that we are looking for,” he added.

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This balance is expected to come in handy particularly at a time when HF was positioning itself to take advantage of the opportunities that will be presented by the creation of counties as spelt out in the new constitutional dispensation.

Although this will result in a slowdown in the urbanisation trend in major cities such as Nairobi and Mombasa, the establishment of counties presents huge opportunities for the development of new cities across the country.

“There’s going to be a lot of need for offices, housing for staff and the like. So there’s going to be a lot of demand in the property industry in about 30 or 45 counties or towns that are today not very active,” Mr Ireri predicted.

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