National Treasury, Public Debt Management Office Director-General Wohoro Ndoho (centre) rings a bell at Nairobi Securities Exchange (NSE) to launch the listing of M-Akiba bond, an exclusively mobile trade bond. [Jonah Onyango, Standard] The dark cloud that has ominously hung over the corporate bond market seems to be lifting.
With three companies – East African Breweries Ltd (EABL), Family Bank and Acorn Holdings – successfully raising billions from this form of debt financing, some analysts see a silver lining in a market that is undergoing a confidence crisis.
EABL, an alcoholic manufacturer, is the latest to issue and list an Sh11 billion corporate bond at the Nairobi Securities Exchange (NSE), which was oversubscribed more than three times. READ MORE
EABL’s medium-term note was oversubscribed by 245 per cent, with the brewer receiving Sh37.9 billion.
The firm was looking to raise Sh11 billion in debt in an offer that was open for 15 days beginning October 6 this year.
A corporate bond is a debt issued by a company to raise capital from the public.
Investors who buy corporate bonds lend money to the company issuing the bond. At the end of a certain period, they receive the interest and principal amount on the bond.
Earlier in July, Acorn Holdings, a real estate company, closed the final tranche of its green bond by raising Sh2.096 billion against a target of Sh1.438 billion.
Three months before, Family Bank had made a return to the corporate debt market by raising Sh4.42 billion, an oversubscription of 147.3 per cent, against a Sh3 billion target.
Some analysts see this as a sign of recovery for a market whose confidence has been badly battered.
Imperial Bank Ltd and Chase Bank spectacularly went down with billions of shillings in investor funds, leaving behind a confidence crisis in the corporate bond market.Rufus Mwanyasi, the managing director at Canaan Capital, writing for a local daily, opined that successful issuances show that “investor confidence has recovered.”Recovery of the corporate bond market would complement other forms of debt financing for businesses, such as bank borrowing.Sara Wanga, the head of research at AIB Capital, an investment bank, shares Mwanyasi’s optimism .Ms Wanga reckons that investors are increasingly becoming risk-averse.“I think there is an appetite in the market because investors are chasing return,” she said.In the case of EABL, the listed company will use the money to finance investments in expanding production, repay debts taken in the ordinary course of business, […]