CBA Sh10bn Corporate Bond to fund expansion

November 26, 2014

, CBANAIROBI, Kenya, Nov 26 – The Commercial Bank of Africa (CBA) has launched a Corporate Bond to raise Sh10 billion broken down in two tranches, following approval by the Capital Markets Authority (CMA).

In the first tranche the bank is seeking Sh5 billion with a green shoe option of Sh2 billion.

CBA Group Managing Director Isaac Awuondo said the bond will have a six year tenure with pricing at 12.75 percent and interest paid semi annually.

Awuondo says part of the money (Sh3billion to Sh4 billion) will be used to enter the Rwanda and Burundi markets in 2015 through acquisitions, partnerships and/or wholly owned subsidiaries.

The bank is currently present in Uganda and Tanzania.

“The way we enter into new markets is to first of all look at potential acquisition targets, that is the exercise we are doing right now. If the acquisition route fails, then the second option for us is to develop partnerships, we are also prepared to set up a completely green field operation 100 percent owned by the bank, “he said.

The bank also plans to use part of the money to meet the new Central Bank of Kenya’s capital adequacy ratio rules that come into effect in January 2015. The regulator wants banks to raise their buffers by up to 2.5 percent of their deposits a move mainly aimed at cushioning institutions in times of economic stress.

The offer for the first tranche opend on Wednesday and closes on December 10, while the second tranche of Sh3 billion will be issued in early 2015.

The issuing of the bond comes after the bank partnered with Safaricom Limited to launch the product M-Shwari which has propelled the bank to become Kenya’s second largest by number of account holders.

Awuondo says there are so far 8.6 million customers on M- Shwari alone, giving 50,000 loans everyday which amounts to Sh1.5 million a month.

He expressed confidence in the M-Shwari product pointing out that 98 percent of the money borrowed is paid back.


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