This archive report was first published on 15 October 2019.
On October 15, 2019, Housing Finance Group (HF) announced the retirement of its Sh3 billion corporate bond, a move that reflects the lender's decision to steer clear of the debt instrument.
The listed mortgage lender cited the interest rate cap regime and reduced investor confidence due to defaults as the main reasons behind its decision. According to HF Group Chief Executive Robert Kibaara, a number of companies had defaulted on their bonds, leading investors to opt for government-issued papers that are less risky.
“The bond market was very vibrant some years back, but the fact that a few companies are yet to pay their bonds really dampens the confidence,” said Kibaara during a press briefing in Nairobi. “You borrow from a bank at 13 per cent and the government is borrowing from the market at about 12.5 per cent. What will investors do if you float a bond? Will they bring that money to you or take to the Government which is safer?”
HF Group had issued the medium-term note in 2012 with a seven-year tenor at a coupon rate of 13 per cent. The bond had significantly helped the firm bolster its loans and advances, which grew from Sh25 billion to Sh44 billion as of December last year, while total assets rose from Sh31 billion to Sh57 billion over the period.
Nairobi Securities Exchange (NSE) boss Geoffrey Odundo expressed confidence in the future of the bond market despite emerging challenges, saying the settlement by HF was a good enough assurance.
