By Patrick Githinji
The Capital Markets Authority (CMA) has approved the issuance and listing of a Sh10 billion medium-term note by Housing Finance.
In a letter signed by the authority’s Chief Executive Officer, Stella Kilonzo, the regulator stated that it was satisfied with Housing Finance’s application and full disclosure of material information in accordance with the requirements of the Capital Markets Act.
The good news follows an earlier nod from the Central Bank of Kenya, which indicated that it had no objection to the issuance of HF’s medium note.
The approval means that Kenya’s premiere mortgage financier can now embark on offering debt securities on a regular and/or continuous basis.
According to HF’s Managing Director, Frank Ireri, the medium term note programme is part of the plan to source long-term funding to bolster growth of its business through mortgage and property financing.
Housing deficit
"The approval and consequent listing will provide the requisite financial muscle to enable Housing Finance play an integral role in helping boost the available supply of housing units with a number of major projects already in the pipeline," he said.
He further reckons that the company will play an indirect role in the supply of these additional housing units by availing financing packages to developers.
Contrary to earlier reports, Ireri said, the funds raised would not go towards enhancing the institution’s capital base, but would be used for on lending and developing new projects.
The approval by the regulator is seen as a boost to the country’s leading mortgage financier, as it seeks to benefit from the growing demand for housing in urban and rural areas.
The current demand for houses is estimated at 150,000 units per annum, with supply estimated at 35,000 units. With such a massive supply gap, the private sector is expected to play a critical role in bridging the housing deficit.
Equally, there exists a huge funding gap as demonstrated by statistics from the Central Bank that show that lending by commercial banks and mortgage finance institutions to the sector as at the end of 2009 stood at Sh9.2 billion, while the private sector approvals to put up properties by the City Council in the year 2009 was valued at Sh77 billion.
In the coming weeks, the mortgage financier is expected to issue its final information of memorandum and a pricing supplement that will provide requisite guidance to investors for the issue.
Issue managers
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The company has already named Standard Chartered Bank Limited and NIC Capital Limited as the joint lead arrangers for the bond issue.
According to analysts and several stockbrokers, the healthy appetite for fixed income security by investors provide an excellent recipe for the success of HF’s proposed debt instrument, which is in tandem with its business model.
The mortgage financier’s model seeks not only to provide mortgages that enable more Kenyans to own homes, but also play a leading role in enabling a steady supply of quality and affordable property in the sector.