Firms with maturing bonds are seeking private cash rather than go back to the corporate bonds market now extending to a 27-month issuance drought.
Housing Finance Group #ticker:HFCK CEO Robert Kibaara whose bond matures in October says he does not intend to issue another security since the price is problematic, costs are high and success doubtful.
“We are almost closing Tier II capital which is easier and you just have to talk to one institution instead of a bond. Overall with risk of non-payment only government is issuing,” he said.
Insurer UAP Holdings redeemed its Sh2 billion bond using new loans while Consolidated Bank — with a negative core capital of minus Sh29 million and operating at a Sh54 million loss as at March 2019 — has turned to a government bailout to pay back an overdue Sh1.7 billion bond issued in 2012.
New entrants like Fintechs who have been active in the market often rely on raising capital privately skirting corporate bonds.
Since 2017 Branch has raised Sh1.5 billion arranged by the Centum-owned advisory firm, Barium Capital, with the latest funding coming in June.
Branch raised Sh200 million closed in July 2017, Sh350 million in June 2018, Sh509.4 million in December 2018 and its fourth commercial in July 2019.
Since April 2017 when EABL #ticker:EABL issued a bond, no Kenyan firm sought long-term debt.
In 2014, the Capital Markets Authority had drawn up plans to boost corporate bond markets to 40 per cent of the Gross Domestic Product by 2023 yet they risk having none.
In the next six months nine corporate bonds will mature — six in 2020, four in 2021 and two in 2022.
Thereafter, there will be no corporate bond in Kenya, East Africa’s largest economy and most liquid capital market.
Meanwhile the government has issued 83 bonds and continues to dominate the market including with two retail bonds where ordinary Kenyans buy the securities via mobile phones dubbed M-Akiba.