Home Afrika bucks bond boom trend

Home Afrika plans a return to the debt market earliest June next year after its debut corporate bond became the first issue to miss the minimum borrowing target.

The listed real-estate company opted to borrow from banks through a private placement after the initial offer realised less than Sh500 million, the minimum required for the Capital Markets Authority-approved note to be declared a success.

Home Afrika has now borrowed Sh500 million at a premium over the 13.5 per cent offered on the bond.

“We had to make variations on the 13.5 per cent,” chief executive Njoroge Ng’ang’a told the Business Daily.

He said the public offer was suspended in favour of a private placement as the market felt the firm was relatively young and the sector is not as established as the banking and insurance sectors.

Listed firms Britam, UAP, CIC, NIC and CfC Stanbic successfully issued oversubscribed bonds in 2014 at interest rates of between 12.5 per cent and 13.5 per cent.

Mr Ng’ang’a added that the firm will be more confident to return to the capital markets from the second half of 2016.

Analysts at Standard Investment Bank said the failure may have arisen from concerns over interest payments over the bond’s five-year tenor. They said the firm needs to propmtly implement its projects as well as sell houses going forward.

“It is potentially detrimental if things do not work out,” said Mr Musau.

The lion’s share or Sh400 million from the private placement proceeds will go towards completion of infrastructure at the Migaa mixed development in Kiambu County.

Llango Development in Kwale County and Lakeview housing project in Kisumu County will receive Sh50 million each.
NIC Capital was the lead transaction advisor.