Housing Finance launches Sh5b bond

By Standard Reporter

Housing Finance on Monday began issuing its Sh5 billion bond to the market, following approval of the firm’s Sh10 billion bond program by Capital Markets Authority (CMA).

According to the issue document, the offer opens on September 20, and closes on October 1, with the settlement date scheduled for October 11.

The notes have been divided into fixed rate notes and floating rate notes. The fixed rate notes will carry a coupon rate of 8.50 per cent per annum, while the floating rate pricing will be pegged at 3 per cent above the 182-day Treasury Bill, with interest payments on both the fixed and the floating rate notes being disbursed semi-annually.

Frank Ireri, HF Managing Director said the bond is part of its funding strategy, and follows on the successful rights issue of 2008 that raised Sh2.3 billion of additional funds.

"Housing Finance is looking at growing its market share from the current 35 per cent to 50 per cent and also seeks to convert 70 per cent of the housing supply units to mortgage business," Ireri said.

He said housing development is a capital-intensive business, which is best financed through long-term credit financing.

"The availability of affordable long-term funding will allow for convenient and effective repayment of such funds," said, Ireri.

Housing Finance has scheduled the bond issuance into three tranches of Sh5 billion, Sh3 billion and Sh2 billion in September this year leading up to the year 2013.

Lead arrangers

The joint lead arrangers for the program are Standard Chartered Bank Limited and NIC Capital Limited, with the Co-operative Bank of Kenya as the paying agent, and Equity Bank as the receiving bank. Livingstone Registrars are the note trustee, Walker Kontos are the legal counsel, and KPMG are the reporting accountants.

Housing Finance funds large-scale housing projects to the tune of Sh700m per project to meet its target of 30,000 new housing units per year. The firm is also involved in financing a range of commercial properties that includes office space, retail shopping centers, industrial usage, hospitality and educational use.