Britam to defend large HF stake in Sh3.5bn cash call
Frank Ireri, the managing director of Housing Finance. FILE PHOTO | DIANA NGILA |
What you need to know:
Participation in the rights issue at a cost of Sh1.6 billion will push Britam’s investment in the mortgage lender to over Sh4.3 billion in a month’s time.
HF needed to raise its core capital so as to support plans to diversify into conventional banking which has more weighted risks.
HF intends to work with county governments to undertake housing projects, with the governors providing land and the mortgage lender doing the construction.
Britam has committed to participating in Housing Finance rights issue, edging the mortgage lender closer to a successful fund raising.
Participation in the rights issue at a cost of Sh1.6 billion will push Britam’s investment in the mortgage lender to over Sh4.3 billion in a month’s time.
The insurance and investment company owns 46.08 per cent of Housing Finance following acquisition of a 24.7 per cent stake in the company owned by Equity Bank in December for Sh2.7 billion.
“The majority shareholders have confirmed their participation,” said Frank Ireri, the managing director of HF.
The capital raising provides an opportunity for Britam to further increase its shareholding in HF by buying rejected rights if it so wishes.
Shareholders who do not wish to buy the new shares have the option of denouncing them at a fee or leaving the listed house loans company to allocate rights as per its allotment policy.
HF is selling 116,666,667 shares to its existing owners at a discounted price of Sh30 per unit to raise an additional capital of Sh3.5 billion. Its shares Tuesday traded at an average Sh48.50 each. The new shares will be distributed in the ratio of one for every two shares currently held.
HF said it would consider the capital drive successful if it achieves a 50 per cent subscription level indicating that with Britam’s commitment it is almost half way there. NIC Capital is the transaction advisor.
Mr Ireri said the bank needed to raise its core capital so as to support plans to diversify into conventional banking which has more weighted risks.
The bank’s core-capital to total-weighted risk ratio stood at 10.3 per cent in September against the new requirement of 10.5 per cent, which took effect at the beginning of the year.
Mr Ireri declined to confirm the bank’s capital position at year-end but the cash injection is expected to provide HF with a good buffer.
HF got a licence to operate current accounts two years ago, giving it leeway to engage small-and micro-enterprises who have diverse financing needs.
The bank plans to raise debt of up to Sh20 billion through a corporate bond that has already been approved by the capital markets authority. It has in the past blamed prevailing interest rates, which it considered too high for holding off plans to raise the debt.
HF seeks to play a bigger role in bridging the housing deficit in the country by stepping into the development space through its subsidiary Kenya Building Society. The subsidiary was revived two years ago after being dormant for 13 years.
Kenya has a housing deficit of 150,000 units. HF intends to work with county governments to undertake housing projects, with the governors providing land and the mortgage lender doing the construction.
It has also partnered with individual land owners in similar joint ventures. Last year the firm partnered with owners of Gretsa University, Kibathi Mbugua family, for construction of 220 housing units on their 5.2 acre piece of land opposite Kahawa Barracks.
