Kenya's Family Bank starts sale of medium-term bond

Kenya's Family Bank started the sale of its medium-term corporate bond on Wednesday, offering potential investors the choice of a fixed, floating and mixed rate portions.

Family initially wants to raise 4 billion shillings ($38.76 million) for 5.5 years, with the option of taking an extra 2 billion shillings, in case of high demand.

The fixed-rate component of the bond offers a coupon of 13.75 percent and is discounted, said Maurice Opiyo, managing director of NIC Capital, which is leading the issue.

He said the floating rate component of the bond will be priced at 250 basis points above the yield of the 182-day Treasury bill, within a set range.

"But it comes at a floor price of 12.5 percent, and we have capped that rate at 17 percent," he said.

Yields on Kenyan Treasury bills jumped to around 20 percent last week mainly due to the central bank's tightening stance.

The third component of the bond, known as the mixed-rate portion, will offer a coupon of 14 percent, with a potential rise based on the appreciation of the bank's shareholder funds. Family is privately held.

The lender, which secured approval for a 10 billion shilling multi-currency bond last month, plans to use two thirds of the targeted funds to boost lending, while the rest will fund new branches, new technology and expansion into neighbouring markets in East Africa.

The bond will be on sale for two weeks.

Family, which started as a building society before developing into a commercial bank, now has assets of 75 billion shillings.