The value of corporate bonds issued on the Nairobi Security Exchange (NSE) has dropped by Sh13.68 billion over the five years since 2014, triggering fears there could be total dry out by 2022 when the last of the current listed facilities mature.
Currently, there are 20 bonds issued by 12 companies with a total value of Sh57.6 billion compared to August 2014 when Kenya had 28 listings with a sum value of Sh71.28 billion.
Although the Capital Markets Authority (CMA) had in 2014 drawn up plans to boost corporate bond markets to 40 per cent of the Gross Domestic Product by 2023, the market risks having none in a few years.
Since April 2017 when East African Breweries Limited (EABL) issued a bond, no other Kenyan firm has sought a long-term debt from the capital markets.
In the next six months, a total of nine corporate bonds will mature in the country; six in 2020, four in 2021 and another two in 2022. Then there will not be a single corporate bond in Kenya, East Africa’s biggest economy and most liquid capital market.
Firms with maturing bonds are seeking private cash rather than go back to the corporate bond market where an issuance drought extends to 27 months.
Robert Kibaara, CEO of Housing Finance Group whose bond matures in October says the company does not intend to take another bond since the price is problematic, the costs are high and success is doubtful.
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“We are almost closing Tier II capital which is easier and you just have to talk to one institution instead of a bond, with risk of non-payment, only government is issuing,” he said.
This sad state of affairs has been caused by the problem of interest rates and a tough environment that has led to a trend of defaulters who have sunk investors cash in black holes.
Foreign investors are no longer confident in giving money to Kenyan companies that they sold off their holdings to reduce exposure. Currently, local corporate bond investors hold 99.33 per cent of amounts outstanding as at the second quarter of the year, according to the Capital Markets Authority(CMA) Soundness report while foreigners had 0.67 per cent of total corporate bond holdings.This goes on to show that companies know that if they make an attempt to raise cash at the market, their issues could flop despite the fact that […]