Investors spoilt for options as Family Bank unveils Sh6bn bond

Family Bank will raise up to Sh6 billion through its first bond issue that also gives investors choices in both interest rates and currencies.

The bank said the first tranche of its Sh10 billion bond issue would see it go to the market to raise Sh4 billion but should there be an oversubscription, it would accept Sh2 billion more through the greenshoe option.

Family Bank chief executive Peter Munyiri said the multiple currency option would give investors the choice of investing in the same bond either through dollars or euros.

“There are investors who have dollar holdings and want to invest in dollars,” said Munyiri during the launch of the bond at the InterContinental Hotel in Nairobi on Wednesday.

Investors who opt to buy in dollars will receive interest payments of three percentage points on top of the six-month London Offered Interbank Rate (Libor), which is an international benchmark for lenders.

Other options are for investors to receive coupon payments using fixed or floating rates that are pegged to the 182-day Treasury bill rate or a mix of the two.

Transaction advisers said that the exact interest payments would be known once the Capital Markets Authority approves the pricing supplement.

Family Bank is issuing the bond at a time when interest rates are high. However, the bank said while the high interest regime is an inconvenience it is not permanent, meaning that they expect investors would buy the bond on hopes the rates would normalise.

“We do not think that interest rates will perpetually stay high,” said Family Bank chairman Wilfred Kiboro.

The bond, which will be sold in notes of Sh100,000, will then be listed on the Nairobi Securities Exchange (NSE) in early November.

READ: Family Bank records 35pc increase in H1 profit on loan earnings

The bank plans to spend the funds on branch expansion, investment in ICT software, increasing its loan book, strengthening its capital base and to fund regional expansion.

On regional expansion the bank said it would look for eligible companies and then buy into them as opposed to starting from scratch.

“For ease of entry you look for something profitable then you acquire it,” said Mr Munyiri.

NIC Capital, which has been active in the bond market, is the lead transaction adviser together with Faida Investment Bank.

Mboya, Wangondu & Waiyaki are the legal advisers while Deloitte are the reporting accountants.

Family Bank joins Chase Bank, Real People and Imperial Bank as other lenders that have gone to the bond market to raise additional funds.

Imperial Bank managed to raise the Sh2 billion that the lender had targeted through its five-year bond. The bond will be listed on the NSE on October 13.