Safaricom’s second bond snapped up by eager investors

Safaricom, East Africa’s largest firm by market capitalisation, received a 50 per cent oversubscription for its Sh5 billion bond, the second it has ever floated.

It follows in the footsteps of KenGen, which recently raised nearly Sh27 billion against an initial target of Sh15 billion, thus making more than 73 per cent oversubscription.

However, the company exercised the green-shoe option in which it had intended to increase the amount taken to Sh25 billion in the event that there was an oversubscription.

The worth of the applications received for the Safaricom bond was over Sh7.5 billion, against the Sh5 billion that has been put on offer.

It was the first tranche of a Sh12 billion bond programme the company has put together.

Other companies that have planned bonds include East African Portland Cement and Centum Investments.

The success of both KenGen and Safaricom is expected to give comfort and pricing indications to the bond issuers still waiting to announce the offer dates.

Safaricom’s bond offer, which is part of an extensive capital-raising initiative the company is implementing, closed on Thursday while allocations were completed last Friday.

The notes had been divided into two options: one with a fixed rate and the other with a floating rate.

Most of the applications and allocations were for the fixed component – which ensures that an investor does not have to worry about changing money prices in the form of interest rates.

The coupon rate was substantially above that of comparable treasury bonds.

Fixed rate

The fixed rate notes carry a coupon rate of 12.25 per cent per year, while the floating rate notes’ pricing are pegged at 185 basis points above the most recent published rate for the 182-day Treasury Bill.

Said Safaricom CEO Mr Michael Joseph in a press release: “We are delighted by the uptake of this bond and the excitement it has generated in the market. This represents a validation of our strategic direction by the market. Safaricom will be using the funding for general corporate capital purposes, including the rollout of some critical projects.”

With the issue of the Sh5 billion medium term note programme, Safaricom has re-established its relationship with the Kenyan corporate bond market.