Family Bank chairman Wilfred Kiboro (left) with the bank's managing director, Peter Munyiri. PHOTO | FILE
What you need to know:
Family Bank is seeking equity financing to supplement proceeds from the recently issued bond.
The bank managed to raise Sh2 billion through a bond, half the Sh4 billion it was targeting with the debut notes.
High interest rates on Treasury bills, tight liquidity and investor uneasiness following the closure of Imperial Bank by regulators made raising the whole Sh4 billion difficult.
Family Bank is in talks with private equity (PE) firms to inject capital into the lender in exchange of a stake in the business.
Chairman Wilfred Kiboro said the company is seeking equity financing to supplement proceeds from the recently issued bond.
“We are now at a fairly advanced stage,” said Mr Kiboro.
The amount or the stake that the bank is looking at selling were however not disclosed.
The commercial bank managed to raise Sh2 billion through a bond, half the Sh4 billion it was targeting with the debut notes.
The programme offered investors a choice of either buying a bond with a mix of fixed interest rate payments, a floating rate of 250 basis points above the 182- day Treasury bill or a bond that was a mix of the two.
The bond also had a green-shoe option of Sh2 billion in case of an oversubscription.
High interest rates on Treasury bills, tight liquidity and investor uneasiness following the closure of Imperial Bank by regulators made raising the whole Sh4 billion difficult.
“Initially we were looking for Sh4 billion in the first tranche. However due to the volatile interest rate environment, we capped our shilling component of the first tranche to Sh2 billion with the balance of the first tranche to be raised via reverse enquiries.
“We are thus delighted that despite the tight liquidity and volatility in the interest rates environment the offer was taken up—a stamp of approval for the bank and the issue, which will now allow us to embark on pursuing the strategic initiatives we mentioned,” said Family Bank chief executive Peter Munyiri.
He added that the lender will borrow the remaining Sh2 billion from the African Development Bank and the European Investment Bank. NIC Bank and Faida Investment Bank were the transaction advisers on the bond issue.
The Sh2 billion to be raised from the development finance institutions will be advanced in dollars and at a cheaper cost than the locally raised bond.
The bank has a Sh10 billion medium term note programme which will run over a five-year period.
Should the proposal to sell a stake to a private equity firm go through, Family Bank will join a list of other lenders that are reaching out to deep-pocketed strategic investors.
Jamii Bora Bank plans to raise Sh5 billion for its expansion, part of which will involve selling a stake to a strategic partner.
The bank already has private equity shareholding by Catalyst Principal Partners who have an 11 per cent stake.
The Imperial Bank debacle is likely to slow the debt market and force other lenders to opt for other avenues. Banks have in the last few years collected billions in the debt market.
The mid-size lender had already issued a Sh2 billion bond before closure. Regulators have barred the notes from trading at the NSE.
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