Corporate bonds not for us, says HF Group

HF Group Chief Executive Robert Kibaara (right), his Nairobi Securities Exchange counterpart Geoffrey Odundo (left), MTC Trust and Corporate Services Managing Director Bukola Awasika and Co-operative Bank Head of Custody and Registrar Services Eden Kaberere when HF announced the retirement of its Sh3 billion corporate bond in Nairobi. [Wilberforce Okwiri, Standard]

The Housing Finance Group (HF) has retired its Sh3 billion corporate bond and vowed to keep off the debt instrument.

The listed mortgage lender said yesterday the interest rate cap regime and reduced confidence levels owing to default had made corporate bonds market unattractive.

Group Chief Executive Robert Kibaara noted that a number of companies had defaulted on their bonds and investors are increasingly opting for government-issued papers that are less risky.

Investors had burnt their fingers in bonds issued by the troubled Chase and Imperial Banks.

“The bond market was very vibrant some years back, but the fact that a few companies are yet to pay their bonds really dampens the confidence,” said Kibaara.

“You borrow from a bank at 13 per cent and the government is borrowing from the market at about 12.5 per cent. What will investors do if you float a bond? Will they bring that money to you or take to the Government which is safer?”

He was speaking at a press briefing in Nairobi when he announced the redemption of the second tranche of the firm’s Sh3 billion corporate bond which matured yesterday. The medium-term note was issued in 2012 with a seven-year tenor at a coupon rate of 13 per cent.

Mr Kibaara said the bond had “significantly” helped the firm bolster its loans and advances, which grew from Sh25 billion to Sh44 billion as of December last year, while total assets rose from Sh31 billion to Sh57billion over the period.

Nairobi Securities Exchange (NSE) boss Geoffery Odundo, however, expressed confidence in the future of the bond market despite emerging challenges, saying the settlement by HF was a good enough assurance.

“This payment is an assurance to the market that when we raise money, we can pay back, and coming on the back of the challenges we have faced in the bond market in the recent past, this reignites the interest the investors can have in this market,” he said.