Capital Markets

Britam bond first tranche targets Sh4bn in a month


Britam group managing director Benson Wairegi at a past event. Photo/FILE

Financial services group Britam intends to raise most of its Sh6 billion bond programme in six weeks, an information memorandum and pricing supplement released Tuesday shows.

It said the medium term note programme would see up to Sh4 billion listed on the Nairobi Securities Exchange from July 21 this year.

“An application is hereby made to list this issue of Notes on the NSE, upon CMA approval, and pursuant to listing of the medium term notes of Britam for an amount of up to Sh4,000,000,000 as from 21st July 2014,” said the supplement.

The listed insurance company said that it would stagger its bond borrowing programme by first raising Sh3 billion and in the event of an oversubscription, it would accept up to Sh1 billion more.

The note, which has a five-year tenor, is offering a 13 per cent fixed interest rate payable semi-annually. Investors will need a minimum of Sh100,000 to participate in the offer.

Raising the money in tranches is meant to make sure that the issuer only gets the amount of money that it needs so as to avoid having idle funds that would still bear interest. The second tranche will be issued in April 2015.

The offer will close on July 4 and results are expected to be out on July 18. Transaction advisers Dyer&Blair Investment Bank need to raise Sh1.5 billion for the first offer to be declared a success.

READ: Britam gets approval to raise Sh6bn

Analysts said the listed insurer had a good chance of hitting its target going by past experience.

“Given Britam’s financial performance where they have been consistently enhancing shareholder value, I believe the issue will be well received in the market,” said Geoffrey Maina, a research analyst at Old Mutual Securities.

Mr Maina added that the last issued corporate bond was oversubscribed, which indicates that there is investor appetite for corporate bonds.

I&M Bank’s corporate bond in late 2013 was oversubscribed by 21.8 per cent, attracting bids worth Sh3.6 billion against the Sh3 billion it had targeted.

Johnson Nderi, corporate finance and advisory manager at ABC Capital, added that by being sold in notes of Sh100,000, the bond would attract retail investors.

Britam said that it would use the proceeds to expand its business units.

“The proceeds of the issue will be used to provide long term funding for Britam’s future strategic growth through local and regional expansion, private equity investments and property investments,” says the information memorandum.

In real estate, Britam plans to construct shopping malls, budget hotels, offices and gated communities on two pieces of land.