NSE grants exemption to allow KenGen bond trade

NSE has approved revision of the KenGen infrastructure bond trading lots down from the traditional Sh50,000. Photo/FILE  NATION MEDIA GROUP

By GEOFFREY IRUNGU

In Summary

• Buyers of power producer KenGen’s infrastructure bond will from today be allowed to trade the securities in batches of Sh3,125 after getting a special exemption from the NSE
• In a statement issued on Friday, NSE chief executive Peter Mwangi said this had become necessary after redemptions (buy-back by KenGen) of the principal value of the Sh25 billion bond resulted in a fragmented register of the securities

Buyers of power producer KenGen’s infrastructure bond will from today be allowed to trade the securities in batches of Sh3,125 after getting a special exemption from the NSE.

The Nairobi Securities Exchange (NSE) has approved the revision of the KenGen infrastructure bond trading lots down from the traditional Sh50,000, for fixed income securities listed at the bourse.

In a statement issued on Friday, NSE chief executive Peter Mwangi said this had become necessary after redemptions (buy-back by KenGen) of the principal value of the Sh25 billion bond resulted in a fragmented register of the securities.

“Following partial redemptions of the principal value that currently stands at 25 per cent, the register has been fragmented resulting in bond holders retaining lots that are not in line with the Sh50,000 size,” said Mr Mwangi.

Automated trading

The fragmentation had led to a situation where such lots cannot be traded at the secondary market via the automated trading system which only supports trading in multiples of Sh50,000.

The KenGen public infrastructure bond (PIBO) was listed on the NSE on November 2, 2009 with the principal valued of Sh25 billion and a fixed-coupon rate of 12.50 per cent.

Mr Mwangi said the matter was deliberated upon by the NSE board and the decision agreed upon to make the changes.

“The NSE board in its last meeting considered this matter and approved a revision of trading lots in KenGen public infrastructure bond from 50,000 to 3,125,” said Mr Mwangi.

However, the change in the trading lots for KenGen will not affect other bonds, Mr Mwangi added.

Avoidance of doubt

“For avoidance of doubt, the other bonds listed on the exchange will not be affected by this review and shall continue trading in multiples of 50,000,” said the NSE boss.

The move was informed by trading rules that allow revision to be made where partial repayments have changed the minimum nominal values.

“Fixed-income securities with periodic partial principal repayments shall be traded at the subsequent minimum nominal value following the partial principal repayments,” says Trading Rules clause 6.6.3.

The KenGen infrastructure bond has been highly popular with investors and traders at the NSE due to its attractive coupon rate and high liquidity.