Home Africa raises Sh500m from bank after bond issue fails

Migaa developer Home Afrika was forced to turn to its bankers for help raising money privately after its attempt to raise Sh900 million in a bond issue in the capital markets was unsuccessful.

This was despite offering potential investors a healthy 13.5 per cent return.

The listed real estate developer released a statement Friday saying it failed to raise the minimum Sh500 million required for the bond offer to succeed.

“The offer, as approved by the Capital Markets Authority, did not meet the minimum threshold for a successful issue,” chief executive Njoroge Ng’ang’a said in the statement. “Consequently, the company has raised Sh500 million through its bankers by way of private placement.”

READ: Home Afrika opens sale of Sh900m bond.

Home Afrika was offering investors 13.5 per cent for a minimum of Sh100,000 loaned to them through the bond, a premium to Government paper. Five year Treasury bonds issued in June last year had a coupon rate of 11.93 per cent.

The firm received CMA’s approval to issue the bond on November 11 last year and marketed it for two weeks between November 27 and December 10.

The bond was to be listed on the Nairobi Securities Exchange.

The company shares, listed on the NSE’s Growth and Enterprise Markets segment at Sh12 in July 2013, are currently trading at Sh3.95 per unit, up slightly from an all-time low of Sh3.20.

READ: Home Afrika's share price drops to all-time low.

The Migaa housing project in Kiambu, which was to be the main beneficiary of the bond money, will receive Sh400 million from the bank facility with Llango Development in Kwale and Lakeview housing project in Kisumu receiving Sh50 million each. Home Afrika had planned to allocate Sh750 million to Migaa, Sh100 million to Lakeview Heights and Sh50 million to Llango.

The company says it is currently involved in five major projects valued at over Sh18 billion, with a target of ten projects in the next five years with a turnover of $1 billion (Sh90 billion).

It reported a 72 per cent drop in half year profit last year to Sh42.9 million from Sh155.49 million a year earlier.