HF targets raising Sh3bn through medium-term note
Posted Sunday, September 23 2012 at 14:11
- Loans to individual borrowers will take up Sh1.1 billion (37 per cent) of the new money raised, self-development projects million and joint ventures take Sh700 million
- The issue comes as the banking industry is edging down which is expected to see borrowers trooping back, although analysts remain cautiously optimistic.
Mortgage lender Housing Finance will be seeking to raise Sh3 billion through a medium-term note that will be sold from October 1 to 12.
This will be the second and last tranche of the Sh10 billion medium-term notes that were first offered in September 2010.
The money raised through the tranche will bankroll increased supply of mortgages through a mix of lending to individuals, land owners and through the HF’s employee home-ownership scheme.
“HF shall use the amount raised to increase housing supply in the market through self-liquidating construction projects entered as joint ventures with land owners, self development projects, individual owner-occupier loans and employer prearranged schemes,” says the supplementary note on the second tranche.
Loans to individual borrowers will take up Sh1.1 billion (37 per cent) of the new money raised, self-development projects million and joint ventures take Sh700 million (23 per cent) each and pre-arranged schemes Sh500,000 million (17 per cent). Joint ventures and the teaming up with land owners is part of the lender’s growth strategy for the next four years.
“Formation of strategic partnerships, collaborations and joint ventures with persons or institutions with huge tracts of land where Housing Finance can leverage on to develop substantial number of housing units,” says the supplementary note.
Initially the medium-term note was to be sold in two equal tranches but following oversubscription, HF decided to exercise the green-shoe option of taking up the surplus cash. Housing Finance’s first tranche attracted Sh7.03 billion against the target of Sh5 billion translating to a 41 per cent oversubscription.
The issue comes as the banking industry is edging down which is expected to see borrowers trooping back, although analysts remain cautiously optimistic.
Francis Mwangi, a research analyst at Standard Investment Bank, said expectations are that loans to developers and contractors will continue but that it was still too early to tell how individual borrowers will behave. “Individuals are still waiting to see how the rates go,” said Mr Mwangi.
Commercial banks have begun cutting base rates after the Central Bank of Kenya lowered its rate to 13 per cent from 16.5 per cent early this month.
Housing Finance cut its base rate to 18 per cent from 23 per cent and said that it expects the reduction to lead to an increase in uptake of mortgages. The new notes are expected to be listed on the Nairobi Securities Exchange’s fixed income segment later, making them the second corporate listing of 2012 after Consolidated Bank listed its Sh1.7 billion in July.
The corporate bond scene has been the quieter over the year, remaining in the shadows of the more active public bonds sector. Recent high rates would also have put off corporates fearing locking high rates in their books.
The price and additional costs of the second tranche will be known later but dealers who spoke to Business Daily said that they will be looking at how the second tranche compares with peer corporate bonds.