Mr Paul Njaga, Chase Bank chief executive officer. PHOTO | SALATON NJAU
What you need to know:
Chase Bank has received approval from the industry regulator Capital Markets Authority (CMA) to raise the funds through a medium-term note programme.
NIC Capital and Genghis Capital, a subsidiary of Chase Bank, have been appointed joint transaction advisors for the bond.
Chase Bank will next month make a debut in the market seeking to raise Sh10 billion through a corporate bond.
The bank said it had received approval from the industry regulator Capital Markets Authority (CMA) to raise the funds through a medium-term note programme.
The seven-year bond will be raised in tranches with the proceeds going to various uses including expansion and strengthening the bank’s capital base.
“The proceeds will be used to strengthen the bank’s core capital, onward lending activities to SMEs, youth, women and agri-business. This also feeds into the expansion of the branch network, investment in IT and product development initiatives,” said bank chief executive Paul Njaga in a statement.
NIC Capital and Genghis Capital, a subsidiary of Chase Bank, have been appointed joint transaction advisors for the bond.
The programme advisors said that they want to take advantage of the present market conditions favouring bond issuers due to good liquidity and the gradual fall of interest rates.
“The note programme is coming at a time when there is a lot of investor confidence in corporate bonds and yields remain sustainable. By having a multi-currency programme, the bank will also be in a position to leverage on the success of last year’s Eurobond which saw high subscription levels,” said Genghis Capital associate director Sammy Ghannam.
Heavy demand for corporate bonds has resulted in a series of oversubscription of offers in the past few months.
The EABL Sh5 billion bond, the last to hit the market, was heavily subscribed attracting Sh9.04 billion representing an oversubscription of 180 per cent.
UAP, CIC, Britam, NIC and CBA are other firms that have successfully raised funds through the bond market.
Home Afrika, which recently issued a profit warning, was the only exception after its Sh900 million bond failed to get enough offers for the CMA to declare the issue a success.
The listed real-estate developer ended up taking a Sh500 million loan from commercial banks in late January.
More issuers are expected to come to the bond market. Centum Investments is looking at the possibility of raising a Sh8 billion bond with Dyer and Blair Investment Bank and Equity Investment Bank, the two joint-transaction advisors, set to kick off non-deal roadshows for the issue.
Analysts say investor demand will be sustained as buyers expect interest rates to fall, making issues at current interest rates attractive.
“There is continued high investor appetite (for government securities also) hence the oversubscription, with investors favouring longer-dated paper as they anticipate rate decline in the future. However, investors are cautious and not pushing down yields,” said Cytonn Investments report for the first quarter of 2015.
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