Investors holding up to Sh400 million worth of Jamii Bora Bank’s corporate bond have committed to convert their interest into shares, helping to raise 40 per cent of the lender’s targeted amount in the upcoming rights issue.
Jamii Bora has planned a Sh1 billion rights issue in September to finance its expansion plans and meet the Central Bank of Kenya’s (CBK) capital requirements.
Besides part-conversion of the bond into equity, the bank has plans to sell a Sh200 million stake to a strategic investor, while Sh400 million will be raised in cash.
“It (conversion of the bond into shares) is just a paper entry transaction once we get the individual investor approvals,” said Jamii Bora chief executive Samuel Kimani on Tuesday during the launch of an agency agreement with Postbank.
Mr Kimani said the lead adviser for the transaction – Standard Investment Bank (SIB) – is finalising on the terms of conversion, which will indicate the equivalent number of shares that each bondholder will get.
“Once we get at least 75 per cent investor approval in the coming weeks, we shall have completed the transaction by September,” he added.
Jamii Bora floated the five-year bond last year with a 13.3 per cent coupon rate. Last month, the bank’s shareholders approved the proposed conversion of the bond into shares and also ratified a proposal to issue five million new stocks through a cash call.
Mr Kimani told the Business Daily that the rights issue – the third the company will be holding since 2011 – will be completed in October while the sale of the bank’s stake will be finalised by end of the year.
“For now, the local strategic investor will get just below five per cent shareholding since this is within limits that CBK allows buyouts without having to get their approval,” said Mr Kimani.
The additional funds collected from the cash call, the bond conversion and strategic investor will increase Jamii Bora’s core capital to Sh2.4 billion, allowing it to grow lending to small and mid-sized (SME) enterprises.
Kenya’s banking laws cap lending to a single borrower at 25 per cent of a bank’s core capital, meaning Jamii Bora can loan up to Sh361 million to one client based on its current core capital of Sh1.4 billion.
On Tuesday, Jamii Bora signed an agreement that will see its customers make cash deposits and withdrawals as well as apply for account opening through Postbank’s agents and branches in Kenya.
This partnership heralds Jamii Bora’s entry into agency banking, a route which the bank hopes will increase its reach across the country.