Jamii Bora issues Sh1bn bond to fund mortgage loans

Jamii Bora Bank is seeking Sh1 billion through a corporate bond issue to fund its mortgage and SME loans business.

The bond sale will mark the third time in two years that Jamii Bora is tapping the capital markets for cash. The lender raised Sh1 billion in two rights issues last year, which was to be used for branch expansion and to meet the regulator’s minimum capital requirement.

READ: Jamii Bora opens Sh500m cash call to shareholders

“This being a private placement we were limited in the number of participants we could approach, but since we have opened the bond to secondary trading, retail and smaller scale investors will also have a chance to access the bond,” said Jamii Bora CEO Samuel Kimani.

Up to 50 per cent of the bond sale will be backed by the African Guarantee Fund, which the lender opted for instead of obtaining a credit rating.

The five-year fixed rate bond will be traded on over-the-counter market.

Coupon rate

Each investor will be required to apply for at least Sh1 million worth of the bond.

It is being offered at a fixed return rate of 13.3 per cent, payable semi-annually, which places it at two percentage points higher than the most recent five-year government bond issued at the beginning of July, which carries a coupon rate of 11.3 per cent.

Faida Investment Bank (FIB) and Standard Investment Bank (SIB) are joint transaction advisors and will also be handling the OTC trading.

“The firm does not have any other major or structured borrowing, and so this will be the senior debt ranking second only to deposits,” said Faida Investment Bank corporate finance director David Mataen during a press briefing Wednesday in Nairobi.

Jamii Bora, however, maintains the option of redeeming any or full part of the bond principal after three years since by that time the market circumstances or the cost of funds may have changed, added Mr Mataen.

Offer period

The bond offer period runs from July 15 to August 19, with trading commencing on August 26.

The Kenyan bond market is dominated by government securities, which account for more than 90 per cent of total bonds turnover.

The corporate bonds segment is dominated by the KenGen infrastructure bond, which accounts for 80 per cent of about eight issues.

Jamii Bora Bank recently announced plans to list in the next one year on the Growth Enterprise Market Segment (Gems) board, potentially giving the bank access to a bigger capital pool.

Real estate developer Home Afrika on Monday became the first firm to list on the Nairobi Securities Exchange’s Gems segment.

Jamii Bora Bank shareholders passed a resolution during the annual general meeting in May to allow for conversion of its share certificates into electronic accounts, setting the stage for the listing.

The bank also split its shares 100 times to increase their liquidity.