Chase Bank Kenya’s first tranche of Sh10 billion seven-year bond started trading on the secondary market of the Nairobi Securities Exchange (NSE) Monday, after successful listing.
The move will enhance the bond’s liquidity as well as provide an investment avenue for many investors who were not able to participate during the offer. “The performance and the listing not only highlight the confidence in the Chase brand, but also investor confidence in corporate bonds. This is in line with the growth of alternative investment opportunities within the Capital Markets as outlined under the Vision 2030,” said Chase Bank Chairman Zafrullah Khan.
This was during the bell-ringing ceremony at the NSE trading floor. Mr Khan noted that the success of the issue came at a time when liquidity in the money market had been considerably constrained.
The Chase Bank rights issue recorded a 161 per cent subscription rate, netting Sh4.8 billion against Sh3 billion on offer. The bank however exercised a green shoe option to ensure all the investors who participated in the issue get allocation.
The first tranche of Sh5 billion bond opened for trade, attracting an interest of 13.25 per cent. In May, the bank launched the medium-term bond to raise additional capital so as to strengthen its capital base and finance expansion.
“There is no doubt that the Kenyan Capital Markets can deliver significant value proposition to corporate issuers. In the context of a diversified financial institution like Chase Bank group, it will enhance the ability of commercial banks to provide long-term lending solutions to a vibrant domestic customer base,” said Sammy Ghanam of Genghis Capital, the lead Transaction Advisor and Co-Placing Agent for the bond issue.
Chase Bank becomes the second company this year to be listed at the Nairobi-based bourse. Earlier in the year, the NSE listed the East African Breweries, whose bond had a subscription rate of 180.88 per cent. The brewer had applied for Sh9 billion. It listed Sh5 billion at the NSE. NSE says it also successfully listed the Housing Finance rights issue which had a total subscription performance of Sh3.5 billion.
Fundraising opportunities
NSE Chief Executive Geoffrey Odundo said these listings demonstrated Kenyan companies’ confidence on the fund-raising opportunities offered by the Capital Markets. “I urge other non-listed companies to consider the corporate debt market as a medium to long-term financing option,” he said.
He noted that the M-Akiba Bond announced by the National Treasury Cabinet Secretary in the 2015/2016 Budget speech will soon be launched in partnership with the Capital Markets Authority, Central Bank, the Kenya Association of Stockbrokers and Investment Banks.
Other partners will include the Central Depository and Settlement Corporation, the Nairobi International Financial Centre Authority, the ICT Authority and the National Treasury.
NSE Vice Chair Bob Karina said the exemption of shares from the Capital Gains Tax would improve liquidity on the Exchange. “Improved liquidity means an increase in the overall number of shares being traded, which is a key attribute that investors look for when investing in the stock market,” he said.
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