CIC Insurance drops rights issue for corporate bond

CIC Insurance has opted to raise Sh5 billion through a bond expected to be rolled out by September.

The listed firm intends to issue the security in two tranches, starting with Sh3 billion and later Sh2 billion.

The firm has ditched an earlier proposal to raise additional capital through a rights issue, saying it would take longer to execute.

“Raising money through a corporate bond is faster than the rights issue. We need the money quickly,” said Nelson Kuria, the CIC Group chief executive.

The proceeds will fund its regional expansion, investment in real estate and its public service vehicle (PSV) business line, Mr Kuria said.

CIC had asked shareholders to approve a rights issue at its 36th annual general meeting. The firm has already hired a transaction team led by NIC Capital and Kingdom Securities, a subsidiary of Co-op Bank for the bond.

“We were mandated on July 11, 2014,” NIC Capital managing director Maurice Opiyo said.

Mboya Wangong’u will be the legal advisers, Deloitte the reporting accountants while Co-op Bank will handle the bond register. Mr Opiyo said the target is to raise the cash between August and September.

CIC already has a number of ready projects where the funds will be deployed.

“The group has embarked on diversifying its operations with a view to tapping into the lucrative real estate sector. Plans are underway to carry out initial projects on the 512-acre Isinya properties,” says CIC Insurance in its 2013 annual report.

READ: CIC Insurance acquires Sh1 billion land for real estate

The insurer has begun its regional expansion by signing a joint venture with Malawi Union of Savings and Credit Co-operatives (Muscco) to start an insurance firm in the southern Africa country.

CIC and Muscco each hold a 49 per cent stake in the operation with an unnamed third institution taking the remaining two per cent. The insurer is also eyeing joint ventures with local investors to launch operations in Uganda and South Sudan in the near term.

The information memorandum for its June 2012 listing on the bourse said the insurer plans joint ventures with matatu co-operatives.

CIC becomes the third insurance company after Britam and UAP to go to the bond market to raise funds for expansion since the beginning of the year.

Britam raised Sh6 billion while results from UAP’s Sh2 billion bond are expected to come out next week.

Both insurance firms also plan regional expansion and property market. Real People, a South African firm that is listed on the Johannesburg Securities Exchange, also plans to raise as much as Sh2 billion through a bond market.

Analysts say there is enough liquidity in the market to support bond issues.