This archive report was first published on 3 October 2019.
Kenya's corporate bond market has faced challenges in recent years, with several defaults by issuers resulting in billions of shillings lost. However, Acorn Group's green bond sale has bucked this trend, exceeding its target with an 85% subscription rate.
The bond, issued in partnership with PE fund Helios, raised Sh4.3 billion of the targeted Sh5 billion. According to Acorn CEO Edward Kirathe, the company had initially set a modest target of Sh2 billion for the first tranche of the medium-term note.
"Raising corporate bonds in Kenya is like walking through a hurricane," Kirathe said, adding that the company was pleasantly surprised by the high subscription rate. "We had initially expected to raise Sh2 billion now and another Sh2 billion later, and then a final Sh1 billion."
The investor mix for the bond comprised about 30% each for pension funds, commercial banks, and development financial institutions (DFIs), while insurance firms accounted for the remainder. The green bond will be tax-free following changes in the Finance Bill 2019, joining infrastructure bonds which are also tax-exempt.
Acorn plans to use the funds raised to finance its low-cost student hostels, known as Qejani, which will charge Sh6,380 (£50) a month. The hostels will cater to students from various universities, including the University of Nairobi, KCA University, and Strathmore University.
