Housing Finance seeks long-term capital for growth

The bond market has lately been active with various corporate businesses offering bonds which have attracted oversubscription.

A total of Sh40 billion has been raised through the corporate bond market.

Similarly, the government has managed to offer three infrastructural bonds worth Sh54 billion. All the three bonds were over subscribed.

Mr Misoka adds that the falling rates of bonds from 12 per cent to the current nine per cent are likely to be more enticing due to the lower cost of the funds.

However, the mortgage provider will have to contend with the challenge of the maturity period of the bond as the bond market has managed bonds with tenors of 10 years.

For HF this is likely to be a shorter tenor given the length of their mortgages.

The longest bond offered by the government has a maturity period of 20 years.

The Central Bank of Kenya is mulling over plans to introduce a 25-year bond which will provide the yield curve for longer tenor bonds.

The other options such as a right issue and strategic partner are less viable for the firm.

A rights issue unlikely to attract full uptake as the equity market is subdued.

In addition, the firm issued a rights issue in 2008 hence another one is not likely to muster the full participation of shareholders.

Similarly, the need for a strategic partner may not be a viable choice as it would lead to dilution of existing shareholding.

The last strategic partner was CDC private equity which exited by selling its stake to Equity Bank and British American Insurance Company.