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Housing Finance, Centum face huge pay-outs as bonds mature

Frank Ireri, the managing director of Housing Finance. FILE PHOTO | DIANA NGILA |
Frank Ireri, the managing director of Housing Finance. FILE PHOTO | DIANA NGILA |  NATION MEDIA GROUP

Housing Finance and Centum face huge pay-outs in the coming months as their listed corporate bonds running into billions come up for redemption in the second half of the year.

Both the mortgage lender and investment group were non-committal on options they will exercise come maturity day for the debt totalling a combined Sh11.19 billion — either cash disbursement from reserves or borrowing afresh.

Mabati Rolling Mills has already redeemed its Sh20 billion eight-year bond that was trading at the Nairobi Securities Exchange and matured on January 3, 2017 though.

Centum has two unsecured notes worth Sh4.16 billion that mature on September 18, making it Kenya’s second firm to face bond redemption this year.

The housing financier’s Sh7.03 billion corporate bond listed on the Nairobi bourse matures on October 2, setting up the bank to repay bondholders the entire principal amount borrowed.

“We have several options to redeem the Bond that we are exploring as a board and once we have decided on the option(s) to use and received any necessary regulatory approvals we shall be able to give further details,” said Frank Ireri, group chief executive at Housing Finance, in an interview.

The bond proceeds accounted for 12 per cent of Housing Finance’s funding sources excluding capital, according to the lender’s unaudited financials as at September 2016.

“The key benefits we have accrued from the proceeds include balance sheet growth via loan disbursements, increased profitability during the period and it has helped us address our asset-liability mismatch,” added Mr Ireri.

Centum in September 2012 floated a Sh5 billion five-year bond to fund private equity investments and real estate.

Weighing options

“The board of Centum will be determining later in the year the appropriate mechanism for redemption of the notes maturing in September,” Centum Capital boss Fred Murimi told the Business Daily.

Mr Murimi said the firm was weighing options such as utilising cash available on the balance sheet or issuing fresh notes, depending on the market conditions.

Proceeds from the bonds were invested in Platinum Credit, Akiira Geothermal, Two Rivers Mall, and Pearl Marina in Uganda, Centum said. “The value of these investments has grown significantly over the past four years and far exceed the cost of the debt,” Mr Murimi said, pointing out that assets grew more than fivefold to Sh56.69 billion at September 2017 from Sh11.5 billion in 2012.

By the time of maturity, Centum will have paid the bond holders total interest of Sh2.8 billion. One tranche is priced at a coupon rate of 13.5 per cent and the other 12.75 per cent.

The experience of Trans-Century’s private bond last year highlights the potential pressure that maturity of such instruments exert on some companies.

The firm nearly defaulted on $80 million bond that matured on March 25 last year, roiling the investment group’s C-suite, finances and stock price.

Chief executive Gachao Kiuna left office two months to maturity date, the stock price plummeted and TransCentury was bailed out by PE firm Kuramo, which injected $20 million in return for 25 per cent equity.

hdavid@ke.nationmedia.com

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