Housing financier Shelter Afrique Development Bank (ShafDB), has postponed the issuance of a Sh64.5 billion ($500 million) bond to 2026 citing high interest rates even as it works on raising investor confidence.
The Nairobi headquartered institution had in its 2024 annual report declared plans to issue medium-term notes in Kenya, Uganda, Tanzania and Rwanda that were to be listed at the Nairobi Securities Exchange.
Shelter Afrique said it will issue the bond in tranches beginning in 2026 with each tranche having a tenure of five to seven years. The development bank has disclosed it will issue the bond in different markets in East Africa in order to protect itself from forex exchange exposure.
“Please note that the Medium-Term Note (MTN) issuance referenced in our reports has not yet been launched, primarily due to prevailing high-interest rate conditions in our target markets, which were not conducive to achieving optimal pricing," said Shelter Afrique in response to Business Daily queries.
"In line with our prudent financial strategy, we opted to wait for a more favourable environment and to strengthen our market position.”
Shelter Afrique earlier said proceeds from the bonds will be invested in Kenya, Rwanda, Uganda, and Tanzania. The institution has housing projects and investments in mortgage refinance companies in multiple African markets.
Kenya government bonds with seven years to maturity have recently traded on the secondary market at a yield of 11.4 percent, with interest rates on the fixed income securities having dropped from highs of 18 percent last year.
Shelter Afrique last issued a bond in Kenya in 2013 being a five year note of Sh5 billion at an interest rate of 12.75 percent.
The credit profile of the development bank took a hit in 2019 when it was forced to enter into debt restructuring arrangements with its lenders following liquidity challenges. The challenges followed a piling up of non-performing loans amidst a run of operational losses.
The Pan-African financier has been restructuring its balance sheet and operations in order to make it attractive to investors. Before making an issuance, companies usually engage potential investors to gauge the price the market is willing to pay, in what is called book building, which could have advised ShafDB’s decision to wait.
“A key preparatory step has been improving our credit profile. In this regard, we are pleased to report that our efforts have been recognized with an upgraded rating by GCR, enhancing investor confidence and enabling us to access better pricing conditions,” said Shelter Afire.
Investors would demand a higher return from an institution whose credit profile is viewed as risky.
The development bank is also looking to raise Sh12.9 billion ($100 million) through a bond in the West African region.
“We are actively preparing to launch a separate issuance program in the West Africa region, targeting the equivalent of $100 million, to further diversify our funding sources and deepen our presence in regional markets,” said Shelter Afrique.
The development bank has also made a Sh25.8 billion cash call to its shareholders who have a three-year period to honour the call.
ShafDB has received a Sh15.48 billion credit line from The Arab Bank for Economic Development in Africa to lend to its shareholders who have subscription arrears.
The Nairobi based Pan-African financier is owned by 44 African countries including Kenya and two financial institutions; African Development Bank and African Reinsurance Corporation.
