Pension funds major buyers of EABL bond that raised Sh11 billion

Pension funds were among the major buyers of the corporate bond issued by East African Breweries Plc (EABL) #ticker:EABL in October last year, a move that more than doubled their investment in debt sold by private companies to Sh6.8 billion.

Before the brewer raised the funds, the corporate bond market had shrunk considerably on the back of defaults and fraud that had seen many companies avoid refinancing or selling new debt through fixed income instruments.

“Investments in listed corporate bond also shot up by 134.59 percent up from Sh2.9 billion in June 2021 to Sh6.8 billion in December 2021,” the Retirement Benefits Authority (RBA) says in its latest annual review of the pensions sector.

“This is partly attributed to the investment in the EABL Domestic Medium Note which attracted an oversubscription.”

The brewer’s bond was oversubscribed by more than three times, reflecting investor confidence in the Nairobi Securities Exchange #ticker:NSE -listed firm.

Investors bid a total of Sh37.9 billion, with EABL taking only taking Sh11 billion it had set out to raise. The five-year security has an interest rate of 12.25 percent payable semi-annually.

The company’s debt is the largest among those listed on the NSE and is followed by Family Bank’s Sh3.9 billion bond paying a fixed interest rate of 13 percent.

The Kenya Mortgage Refinance Company (KMRC) is expected to be the biggest bond issuer in the coming years following its maiden offer that raised Sh1.4 billion in March.

The success of EABL’s bond shows that debt investors are willing to back companies with high credit ratings.

Demand for corporate bonds was generally strong, with some of the issuers offering little to no premium on returns available from risk-free government bonds.

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