NAIROBI, Kenya, Oct 6- Housing Finance (HF) bond issue raked in Sh7 billion against a target of Sh5 billion, representing a 41 percent oversubscription, according to results released on Wednesday.
Local institutional investors took up 98 percent of the issue with the retail ones applying for the remainder, a success that Managing Director Frank Ireri said pointed to the robust appetite for bonds in the market.
“80 percent of the bond was subscribed as fixed, and 20 percent was taken up as floating. We have offered a fixed rate of 8.5 percent over seven years or a floating rate at 182 Treasury Bills plus three percent for those who made that option,” he explained.
This means that those who applied for the floating rate will start getting a minimum of five percent and a set ceiling of 9.5 percent as the rate will be determined by the movement of the T-Bills.
“The settlement date for all those who applied is next Monday October 11 and on October 15 we shall be dispatching the notes’ certificates and we hope to have the bond listed and traded on the Nairobi Stock Exchange before the end of this month,” the MD added.
The firm will exercise its green-shoe option which means that all applicants will get a 100 percent of what they applied for.
Under the option, HF had applied to the Capital Markets Authority to allow it to take whatever additional amount that would be raised above the Sh5billion, which was the first tranche of a planned Sh10billion medium term note.
The vibrant bond market, Mr Ireri said underscored the need to introduce innovative products that can enable the real estate sector to use the capital markets as an avenue for raising its finances that can then be used to meet the housing deficit in the country.
“We are calling on the responsible authorities to urgently implement some of the proposed products such as REITS, the Real Estate Investment Trusts that we believe will form a very key part of funding for property in this market,” he proposed.
Maurice Opiyo the Senior Associate at NIC Capital, the issue’s joint arranger reckoned that the success of the HF’s bond would motivate other companies to raise development funds through the capital markets, a move that would continue to spur the growth of the debt markets.
Although some experts have argued that the bond market will slacken as a result of the recovery in the equities markets, Mr Opiyo said activity in the secondary market will still be there as many investors seek to diversify their portfolio.
“Investors always try to spread out their risk. Equities market is volatile and that might subject to investors’ returns. So as much as the equities market might be on a reversal, we will still be expecting other activities within the bond market,” he argued.