Capital Markets

Home Afrika opens sale of Sh900m bond


Home Afrika CEO Njoroge Ng’ang’a at a past event. The firm offered an interest rate of 13.5 per cent on its five-year bond. PHOTO | SALATON NJAU

Listed real estate developer Home Afrika opened the sale of its Sh900 million corporate bond Thursday, with the bulk of proceeds earmarked for its Kiambu Migaa project.

The company is offering an interest rate of 13.5 per cent for the five-year bond.

The Treasury’s two issues of five-year bonds in April and June this year carried coupon rates of 10.87 and 11.93 per cent respectively, showing that Home Africa’s offer is at a premium of up to 2.63 per cent on government paper.

The bond will be issued with a minimum subscription of Sh100,000 and thereafter additional buys of multiples of Sh100,000.

The bond will be on sale for two weeks, closing on December 10, and will commence trading on the fixed-income segment of the NSE on December 19.

Home Afrika received the Capital Markets Authority’s (CMA) approval to issue the bond on November 11.

The firm plans to use proceeds from the bond to fund three of its ongoing projects — Migaa in Kiambu, Lakeview Heights in Kisumu and Llango in Kwale.

READ: Home Afrika eyes bond market for project funds

The firm said that 83.3 per cent of the proceeds would be deployed within Migaa. “The balance of the proceeds will be deployed in Lakeview Heights and Llango Projects,” said the company in an information memorandum to investors.

Home Afrika says it is currently involved in five major projects valued at over Sh18 billion, with a target of 10 projects in the next five years with a turnover of $1 billion (Sh90 billion).

Revenues generated

In the six months to June, the company reported a 72 per cent drop in profit to Sh42.9 million from Sh155.49 million a year earlier.

One of the major reasons for the drop is that real estate firms can only recognise revenues once projects are completed and sold and Home Afrika, therefore, has to wait until projects are finished before it can record revenues generated.

The firm’s shareholders have to wait longer to earn dividends from the property.

The company also plans to issue a Real Estate Investment Trust (REIT) for which it has also appointed NIC Capital as transaction advisers. The firm has appointed the same advisers for the bond issue.