Centum explores Sh8bn bond option in expansion plan
Centum chairman Chris Kirubi and CEO James Mworia with French investors at a construction site in Runda. PHOTO | FILE
What you need to know:
The funds are to finance Centum's ambitious strategic plan that will focus on investments in the education, health, energy, financial services, fast moving consumer goods (FMCG), ICT and real estate sectors.
Centum Investments is exploring the possibility of raising an estimated Sh7.5 billion from the bond market to fund its operations in various sectors of the economy.
The Nairobi Securities Exchange (NSE)-listed investment firm has appointed Dyer & Blair Investment Bank and Equity Investment Bank as joint transaction advisors for its capital raising plan.
The transaction advisors have begun making non-deal road shows, a form of marketing meant to gauge the level of investor interest in the firm’s bonds, fund managers said.
Even as Centum management said it is still testing the ground on the exact amount to be raised, sources who have been briefed by the advisors confirmed the firm is looking at raising up to Sh7.5 billion.
Centum confirmed that the two transaction advisors have begun talks with fund managers, who are traditionally major buyers of bonds, on whether they would be interested in buying another note but added that it has not settled on the amount to be raised.
“We have not yet made any commitments but we want to test the market’s appetite for bonds,” Centum Investments corporate affairs director Fred Murimi told the Business Daily.
Should Centum go ahead with the bond it will be the second such issue for the firm, having raised Sh4.2 billion in late 2012. At the time it raised the money through a private placement and the notes were later listed on the NSE in February 2013.
The proposed additional funds are to finance its ambitious strategic plan that will focus on investments in the education, health, energy, financial services, fast moving consumer goods (FMCG), ICT and real estate sectors.
A presentation on the non-deal roadshow shows that within the next three years Centum estimates that it will need an additional $250 million (Sh22.75 billion) to invest in the eight sectors.
The investment firm first plans to develop projects and then invite investors at a later stage. Investors and Centum will then fully or partially exit from these projects once they have matured.
“As developer and promoter, Centum will fund projects during development phase but will invite financial investors after de-risking projects,” indicates the presentation.
The investment firm also plans to increase its total assets to Sh120 billion by 2019 from Sh42 billion as at September 2014. Analysts said the market is ripe for bond issuers due to the high liquidity.
“There is quite some liquidity at the moment. Central Bank of Kenya (CBK) is both in the REPO and TAD (Term Auction Deposit) markets,” said African Alliance Investment Bank chief executive Alistair Gould.
Interest rates are also expected to come down and consequently reduce the borrowing cost for issuers.
East African Breweries Limited (EABL) which is raising Sh11 billion, will offer a 12.25 per cent coupon or interest rate. Utility company KenGen is also looking at, among other options, the debt market to raise funds for its expansion.
KenGen CEO Albert Mugo said the company is in talks with the NSE on the possibility of floating asset-backed securities to raise cash for power production.
“We are looking at using assets such as geothermal wells to back debt securities,” said Mr Mugo.
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