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Shelter Afrique lines up Sh3.5 billion bond

By By JAMES ANYANZWA | September 10th 2013


The Nairobi based Pan African Housing and Urban Development Financier, Shelter Afrique has launched a Sh3.5 billion, five-year bond with a provision to raise the amount to Sh5 billion in the event of over subscription.

The issue, which concludes on September 20, constitutes the first tranche of the company’s Sh8 billion medium term note, which was approved by the Capital Markets Authority (CMA) last month.

Managing Director Alassane BÂ said the bond issue reflected the company’s desire to focus on long-term funding solutions for the provision of affordable and adequate housing in Kenya.

 “The positive market reception to our past bond offerings has been quite encouraging and clearly demonstrates increased local investor confidence in Shelter Afrique’s long-term value proposition,” he said in a statement yesterday.

BÂ confirmed that the projects to benefit from the bond issue have already been identified.He pointed out that poor planning, lack of finance, and high cost of infrastructure development and that of building materials remain major challenges to decent housing in the country.

“CfC Stanbic Bank and its financial services arm Standard Bank Group (SBG) Securities are the joint arrangers.

However the bond issue comes amid concerns over the quality of the company’s loan portfolio with international rating agency Moody’s, assigning a Ba1 issuer rating to the mortgage financier.

According to Moody’s, the poor asset quality of Shelter Afrique’s loan portfolio is an ‘important’ rating constraint.

 “Although Shelter-Afrique is well capitalised, its current lack of callable capital means that it is more at risk than most other multilateral development banks (MDBs),” said Moody’s in a statement last month.

adequate liquidity

It said the poor asset quality of Shelter-Afrique’s loan portfolio is an important rating constraint. But on a positive note the Ba1 issuer rating reflects the company’s strengthening capitalisation, adequate liquidity and low leverage. The rating means that the mortgage financier is likely to face demands for higher interest on the planned bond.

However, analysts reckon that such a risk might have been factored in at the time of restructuring the bond.

“ If a credit rating is issued before the bond is floated then this rating will be taken into account in the evaluation process when setting the interest rate of the bond,” said John Kirimi, executive director Sterling Capital Ltd.

The proceeds of Shelter Afrique’s bond issue will be used to assist private and public sector institutions in Africa in identifying, financing and implementing housing and related infrastructure.

The cash will also be used to fund a number of housing projects across the country including 10 residential development projects with an estimated cost of Sh9 billion.

This is the sixth bond to be issued by Shelter Afrique since 2000.

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