Safaricom bond debuts at the Nairobi bourse

By Morris Aron

Players in the capital markets called for more market reforms as Safaricom bond issue started trading at the bourse.

The first tranche of a five-year Sh12 billion bond, was initially expected to raise Sh5 billion. It was 50 per cent oversubscribed, and Safaricom exercised the green shoe option, absorbing the extra Sh2.5 billion.

"The 7.5 billion... (will be invested in) the telecoms infrastructure, particularly the data network. This will go mostly to grow our 3G network, and grow our WiMax," Michael Joseph, the Chief Executive of Safaricom said.

The market players want the regulators to keep reforming structures to guarantee increased liquidity in the bond market.

Players called on Central Bank of Kenya (CBK), and the Capital Markets Authority to extend trading periods for bonds and hasten the re-opening of benchmark bonds.

"A number of international investors have expressed concerns over the level of liquidity at the bond market," Joseph said.

"It is our hope that regulators will provide an enabling regulatory framework that will encourage companies to continue seeing the local capital market as a ready, and capable partner in raising capital to fund development."

The calls come as the CBK and other market regulators undertake reforms to address the concerns raised by transaction advisors and other market players.

Last month, Nairobi Stock Exchange (NSE) automated trading of Treasury bonds at the bourse. In August, the CBK announced the country’s first one-year Treasury Bill, which analysts say will ensure an accurate yield curve that is useful in pricing short-term loans and fixed deposits interest rates.

CBK has also earmarked two, five, 10, 15, and 20 year bonds, as ‘benchmark’ papers for marking out a reliable interest rates yield curve, in addition to the three and six month instruments.

New Regulations

Speaking at the official listing of the bond, Treasury Permanent Secretary, Joseph Kinyua, urged players to exploit the new regulations that are continuously under review to improve bond market liquidity.

"Trading through the secondary market will ensure increased liquidity and at the same time allow for self determination of the values of the listed items," explained Kinyua.

Peter Mwangi, the NSE chief executive said the bourse and other stakeholders were undertaking reforms to ensure that the application process of any bond is made shorter and predictable to encourage companies to list at the NSE.