Integrated property and financial solutions provider, HF Group’s banking subsidiary HFC, is set to redeem in full its first tranche Medium Term Note (MTN) upon maturity on October 2nd. In 2010, the company raised Kshs. 7,030,900,000 under the 7 year Medium Term Note (MTN) whose programme size was Kshs. 10,000,000,000. The total notes on a fixed rate of 8.5% per annum amount to Kshs. 5,865,400,000 while the total notes on floating rate are KSHS. 1,165,500,000. The floating rate notes were on a margin of 3% plus 182 day Treasury bill rate of the last auction immediately preceding the interest payment date subject to a minimum of 5% per annum and maximum of 9.5% per annum.
Making the announcement, HFC Managing Director Sam Waweru said that the corporate bond would be redeemed in full upon its maturity on October 2nd 2017. “The medium term note program was a critical fundraising component and was a straight bond issue that did not have an equity upside.”
HFC is grateful to all the investors who demonstrated great confidence in the organization by investing in the corporate bond issue, the Central Bank of Kenya (CBK), Capital Markets Authority (CMA), Nairobi Securities Exchange (NSE) and the Central Depository and Settlement Corporation (CDSC) amongst many other players whose support made the milestone possible.
The bond repayment was financed through a mixture of internally generated funds and debt refinancing. In the current year, HFC raised Kshs. 4.5b equivalent from international financiers, part of which has gone towards refinancing the bond settlement.
The funds accrued from the bond provided a key leverage upon which the bank continued to implement its growth strategy. The proceeds from the bond boosted the Bank’s capital and liquidity as well as the balance sheet. In 2009 just before the bond was issued the bank’s loan book stood at Kshs15 billion and by end of 2016 the loan book had grown to Kshs 54 billion, a 360% growth. Profitability improved from Kshs 351m in 2009 to Kshs1.365 billion in 2016, a 390% growth. The full repayment of the bond despite the prevailing macro environment is a demonstration of the Group’s strength.
“From a strategic perspective we were able to provide SMES with working capital, project financing as well as investment in large scale retail housing projects such as Precious Heights in Riruta and Kahawa Downs in Kahawa along the Thika Super Highway,” Mr. Waweru said.
Mr. Waweru said the bank would continue to tap into both local and international markets to raise funding to realize its growth strategy.
“The actual instruments will vary depending on the target use and investors plus of course the prevailing market conditions. But it’s the Group’s intention to be able to issue some asset backed securities in future to release liquidity held in the mortgage assets,” said Mr. Waweru.