The Housing Finance (HF) #ticker:HFCK has raised more than Sh3 billion from international investors, with the company planning to use part of the debt to help repay its Sh7 billion corporate bond which matures on October 2.
“We raised more than Sh3 billion in foreign currency debt in mid-July,” HF’s chief executive Frank Ireri told Business Daily in an interview.
“We will use the funds to repay the bond and also finance our operations,” he said, adding that investors offered the company more than the Sh1.5 billion it had initially targeted.
He did not disclose the price and tenor of the funds borrowed. The identity of the financiers was also not given but the company had earlier said it would seek funds from development finance institutions.
The bond is equivalent to nearly about 10 per cent of HF’s total assets of Sh71.9 billion as of March. The company plans to combine the borrowed funds with normal cash flows and liquidation of government securities to redeem the bond.
It held Sh4.1 billion of government paper as of March.
The HF raised the Sh7 billion in two tranches in 2010 at cheaper rates when markets were more accommodative, with corporate bonds typically oversubscribed. The company raised Sh5.86 billion at an annual fixed interest rate of 8.5 per cent.
The other 1.16 billion was issued at a variable rate of the coupon on the latest 182-day T-Bill plus a margin of three per cent, subject to a minimum of five per cent and a maximum of 9.5 per cent.
Repayment of the bonds comes at a time when the company’s earnings have dropped sharply on the back of reduced property sales and capping of interest rates that has narrowed margins from lending.
HF’s after-tax profit dropped 73 per cent to Sh88.3 million in the three months to March from Sh327.4 million a year earlier.
This was after interest income declined 19.5 per cent to Sh1.8 billion as it recorded significant defaults on its loan book which grew 2.1 per cent to Sh54.5 billion.