Property developer Acorn Holdings will exercise early redemption of its green bond, which has an outstanding balance of Sh1.86 billion, meaning investors will receive their final settlement ahead of the November 8, 2024, maturity date.
The firm had raised Sh5.7 billion through the bond in multiple transactions starting in 2019, with the funds used to develop its branded student hostels. Acorn has paid part of the bond, which has a fixed interest rate of 12.25 percent, and intends to continue with the early redemption strategy.
“We will definitely be retiring the bond a little early, not too early, because you want investors to get the full value of their investment. The green bond was always structured to have some early redemptions, and this de-risked the bond from the normal corporate bonds, which usually have a bullet maturity,” Acorn Holdings CEO Edward Kirathe told the Business Daily.
Mr Kirathe says the developer will not return to the market for additional capital raising via bond issuance shortly following its successful close of a $180 million (Sh23.7 billion) concessional loan to the US International Development Finance Corporation.
With the early redemption of the bond, the first and thus far sole green debt instrument listed at the Nairobi Securities Exchange will be retired from the market.
Acorn Holdings kicked off its capital raise via the green bond in October 2019, raising Sh4.3 billion in the first tranche against the targeted Sh2 billion. The developer would later upsize the size of the bond to Sh5.7 billion following the green light from the Capital Markets Authority in May 2021.
The funding secured from the American Development Bank was to scale its bed capacity by 250 percent to 70,000 over the next decade as the developer banks on the shortage of student accommodation in the market to rake in higher returns.
“We have fully utilised the green bond and for now, we will not do another bond because we have received money from the US International Development Finance Corporation. If you look at the Acorn Income Real Estate Investment Trust today, it has some local commercial expensive debt. The $90 million from US International Development Finance Corporation going to the Income REIT will go in at a discount of maybe five or six percent," Mr Kirathe says.
The concessional financing tapped by Acorn Holdings Ltd will be held by Stanbic Bank as cash collateral in an interest-bearing account with the bank extending Kenya Shilling denominated financing to the student accommodation focused developer.
This structuring of the financing is designed to ensure that over the 18-year life of the financing from the American development bank, Acorn Holdings is cushioned against exposure to foreign exchange related risks.
