Friday
October 4, 2013
October 4, 2013
Money Markets
Shelter Afrique offices in Nairobi. The housing financier's bond offer
got Sh5bn subscriptions from institutional investors, banks and
insurance companies. FILE
Nation Media Group
By GEORGE NGIGI
In Summary
- Shelter Afrique’s bond received Sh5 billion subscriptions from institutional investors, banks and insurance companies.
- The mortgage firm said it absorbed all the funds as the offer had a green-shoe (allowance to absorb the extra funds) option of up to Sh1.5 billion
Pan-African mortgage financier Shelter Afrique’s
Sh3.5 billion bond has been oversubscribed, with most investors
preferring to lock in high rates of return in an uncertain interest rate
environment.
The bond offer, that was open for 10 days,
received Sh5 billion subscriptions from institutional investors, banks
and insurance companies. The mortgage firm said it absorbed all the
funds as the offer had a green-shoe (allowance to absorb the extra
funds) option of up to Sh1.5 billion.
“This first tranche offered fixed- and
floating-rate notes and saw institutional investors snapping up 62 per
cent of the notes while banks and retails and insurance companies
received 26 per cent and 12 per cent respectively,” said the company in a
statement.
The bond allowed investors to choose whether they
wanted a fixed rate of return set at 12.5 per cent or a floating rate
pegged on the 182-day Treasury bill rate with a margin of 1.5 per cent.
The floating rate would however not fall below
seven per cent or exceed 16 per cent. The minimum subscription for the
offer was Sh100,000 with a five-year tenor.
The floating rate uptake comprised 15 per cent of
the subscription translating to Sh760 million with the remaining 85 per
cent going to fixed rate subscribers, approximately Sh4.23 billion.
Currently the six-month government paper is priced at 9.7 per cent, at
which rate the paper will pay interest at 11.2 per cent.
The uptake pattern underlines the appetite of most
investors to lock in the predictable high return of 12.5 per cent in an
environment where interest rates have been volatile.
The 182 day T-bill rate rose to 10.8 per cent at
the end of August from 6.8 per cent in July before declining to the
current 9.7 per cent.
Investors gave a cold shoulder to a red flag
raised by international rating agency Moody’s over Shelter-Afrique’s
loan portfolio, which pointed out that debt issued by the firm is deemed
to have speculative elements and are subject to substantial credit
risk.
“This is the sixth time Shelter Afrique is tapping
into the Kenya debt capital markets and the positive market reception
to the bond offering is a clear indication of investor confidence in our
long-term value proposition,” said Shelter Afrique managing director
Alassane Bâ.
Shelter Afrique currently has three medium-term
bonds listed on the Nairobi Securities Exchange (NSE) with coupon rates
of between 12.5 and 12.75 per cent.
The notes are expected to start trading on the NSE on October 18, 2013.
Analysts also attributed the oversubscription to the friendly investment terms associated with corporate bonds.
“You don’t have to own a CDS account with Central
Bank so it is easy to participate,” said Johnson Nderi, head of research
at Suntra Investments.
No comments :
Post a Comment