HF clears corporate bond payment

Listed lender HF Group Monday paid off the final Sh3.2 billion instalment of its corporate bond which initially stood at Sh10 billion in 2016.

HF paid off the first Sh7 billion instalment in 2017 after raising the amount from borrowings and monthly cash collections from its lending and property development operations. Group chief executive Robert Kibaara said they internally sourced monies to redeem the medium term note issued in 2012 with a seven-year tenor at a coupon of 13 percent.

Mr Kibaara said the firm had no plans to float a new bond soon, noting that increased government borrowing and the interest rate cap made the corporate bonds’ market unattractive.

“Most companies have failed to fulfil their bond’s redemption pledge mainly due to governance issues and with the government borrowing at nearly 13 percent makes it difficult for us to float a bond as people deem government bonds more secure than corporate bonds,” he said.

HF spent the bond monies to transform from a mortgage financier with 51,920 customers in 2012 to a fully-fledged “digital” lender serving 413,090 customers by December 2018,. He, however, declined to disclose progress made in its recovery journey terming information as “market-sensitive”, and that the disclosure will soon be made to investors.

The value of corporate bonds on the Nairobi Security Exchange (NSE) stands at Sh57.6 billion from 20 bonds issued by 12 companies, being a Sh13.68 billion drop registered in August, 2014 when Kenya had 28 listings valued Sh71.28 billion.

The dry run portends bad tidings come 2022 when the last listed bond will mature.

Nine corporate bonds will mature in six months, six in 2020, four in 2021 and the rest in 2022 leaving East Africa’s biggest economy and most liquid capital market without an active corporate bonds’ market.

Firms with maturing bonds are seeking private cash rather than go back to the corporate bond market.