Family Bank is returning to the corporate bond market, seeking to raise Sh4 billion to fund its growth.
The lender says it has received approval from the Capital Markets Authority to raise the funds by way of a public offer.
The bank plans to raise another Sh4 billion within the next five years in multiple transactions, raising the potential total debt issuance to Sh8 billion.
“We are positioning the bank for the second phase of growth as per our 2020-2024 strategy anchored on growth and stability of the bank,” Family Bank’s chief executive Rebecca Mbithi said in a statement.
“Through this capital raising, the bank is eyeing to strengthen its capital base to support lending to micro, small and medium-sized enterprises and heavily invest in technology infrastructure while diversifying our product and market offerings.”
The bonds will have a tenor of five years and their other features, including interest rates, will be set in the coming days.
“A specific pricing supplement shall be forwarded to the Authority for approval in respect of each proposed tranche to be issued,” CMA said in a letter approving the bond issuance.
Investors will apply for a minimum of subscription of Sh100,000 and additional investments above that will be in multiples of Sh100,000.
The corporate bond market has shrunk considerably in recent years after investors were burnt by the defaults of Imperial Bank and Chase Bank.
Most of the issuers redeemed their bonds and opted for other alternative source of funds including loans from banks, shareholders and development finance institutions.
There are only three investment-grade bonds trading on the Nairobi Securities Exchange and which were issued by East African Breweries Limited (Sh6 billion), Acorn (Sh2.4 billion) and Centum (Sh5.2 billion). The bonds have interest rates ranging from 12 percent to 14.1 percent.
Family Bank’s return to the debt market comes after it redeemed Sh2 billion bonds in April. The bonds, which matured after five-and-a-half years, had blended interest including variable and fixed rates of 13.75 percent.
Family Bank has hired NCBA Investment Bank and Genghis Capital as its lead transaction advisors and PricewaterhouseCoopers (PwC)as the reporting accountants.
MTC Trust and Corporate Services Limited are the note trustees, Mboya Wangong’u & Waiyaki Advocates are the legal advisors and Tim-Sky Media Services are the public relations consultants.