HF Group's #ticker:HFCK banking subsidiary HFC is set to take a new Sh4 billion loan from international financiers this quarter to fund its operations after rejecting an expensive debt offer from the local market.
The mortgage financier had sought to raise Sh3 billion in June through a one-year private placement debt, attracting investors whose bids ranged between 11 per cent and 13 per cent.
HFC’s managing director Sam Waweru said the private placement was cancelled in favour of the new loan whose interest rate “is in the single digits.”
“We have initiated discussions for about Sh4 billion and these are at an advanced stage,” Mr Waweru said, adding that the money is expected in this quarter ending December.
“We chose not to go with it (private placement) because of the very steep rates that investors have been asking.”
The upcoming loan will bring HFC’s fund-raising to Sh8.5 billion this year.
The company recently raised Sh4.5 billion from a similar loan, part of which was used to repay its Sh7 billion bond on Monday.
The bond was redeemed using Sh2 billion from the loan and Sh5 billion from internally generated cash.Mr Waweru said that taking debt at 13 per cent does not make economic sense when lending rates are capped at 14 per cent.
Borrowing in the local market at single digits is however difficult, with the benchmark one-year T-bill currently yielding nearly 11 per cent.
Mr Waweru said HFC could return to the local corporate bond market next year if conditions will be favourable.
The new loan offer, which is expected to attract development finance institutions, will mature in seven years.