Family Bank Limited joins Centum (Ksh 5.2 Billion), Acorn (Ksh 2.4 Billion) and East Africa Breweries Limited (Ksh 6 Billion) by their return to the corporate bond market. This time Family Bank is looking for Ksh 4 Billion within the next five years. Centum, Acorn and East Africa Breweries are the only three investment-grade bonds trading in the Nairobi Securities exchange.
The Family Bank bond was fully subscribed raising Ksh 4,417,710,000. The money was raised from retail investors, banks, local fund managers, insurance companies and other institutional investors. Investors will be applying for a minimum subscription of Ksh 100,000 and any additional investment is also in multiples of Ksh 100,000.
Capital Market Authority Approves Family Bank’s Bond Issuance
The Capital Market Authority (CMA) approved Family Bank to raise the funds by the way of public offer. This bond will raise Family Bank’s total debt issuance to Ksh 8 Billion.
The CMA confirmed in a press release published on 24th June 2021 stating that they had approved Family Bank Limited to take up a ‘green shoe option’ (see below) of Ksh 1 Billion after the first tranche of its multi currency Medium Term Note (MTN) recorded an oversubscription of 147.3 percent. The approval was issued on 8th June 2021.
According to Chief Executive Officer, Wycliffe Shamiah, the CMA is delighted with the performance of the Family Bank Medium Term Note which is instrumental in reviving the corporate bond market. It is because of this fact that the CMA allowed Family Bank Limited to take up from the investors the Ksh 3 Billion that was approved for the first tranche and the extra Ksh 1 Billion offered by the same pool of investors.
The MTN programme will be issued as both Fixed Rate Notes and Floating Rate Notes. The notes will have a maturity period of not less than five years. The Fixed Rate Notes will bear fixed interest payable on dates to be specified in the Price Supplement while the Floating Rate Notes will bear interest benchmarked against the prevailing Treasury Bill rate.
The Kenya Shilling denominated notes will be listed on the Fixed Income Securities Market Segment of the Nairobi Securities Exchange.
Bond Benefits Family Bank
By getting the capital boost, Family Bank is focused to strength its capital base to support lending to micro, small and medium-sized enterprises and heavily invest in technology infrastructure while diversifying our product and market offerings.
Family Bank’s Chief Executive Officer, Rebecca Mbithi, stated that they are positioning the bank for the second phase of growth per Family Bank’s 2020-2024 strategy anchored on growth and stability of the bank.
Are Corporate bonds a safe way to invest?
Investment-grade bonds have an interest rate ranging between 12 percent and 14.1 percent, a decent rate for investors.
However, in the recent years there have been cases of banks defaulting such as Chase Bank and Imperial Bank. Such defaulting cases have made many investors lose their money hence negatively affecting how corporate bond market is perceived.
Family bank has contracted NCBA Investment Bank and Genghis Capital as their lead transaction advisors. On the side of accounts, Price Water House Coopers (PwC) has been selected as the reporting accountants.
The MTC Trust and Corporate Services Limited are the note trustees with Tim-Sky Media Services contracted as the public relations consultants. For the legal sector, Mboya Wangong’u & Waiyaki Advocates are the legal advisors.
*A greenshoe option is an over-allotment option. In the context of an Initial Public Offering (IPO), it is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than initially planned by the issuer if the demand for a security issue proves higher than expected.