This archive report was first published on 17 October 2019.
October 17, 2019, marked the final payment of Sh3.2 billion by Housing Finance Group (HF) towards its Sh10 billion corporate bond, effectively exiting the debt instrument.
According to Group Chief Executive Robert Kibaara, the lender's decision to avoid corporate bonds is largely due to the unattractive market conditions caused by increased government borrowing and the interest rate cap.
“Most companies have failed to fulfill their bond redemption pledge mainly due to governance issues, and with the government borrowing at nearly 13 percent, it makes it difficult for us to float a bond as people deem government bonds more secure than corporate bonds,” Kibaara said.
He further noted that investors are increasingly opting for government-issued papers due to the perceived lower risk, citing the losses suffered by investors in bonds issued by troubled Chase and Imperial Banks.
“You borrow from a bank at 13 percent and the government is borrowing from the market at about 12.5 percent. 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 had paid off the first Sh7 billion installment in 2017 through loans and monthly cash collections from its lending and property development operations.
The value of corporate bonds on the Nairobi Security Exchange (NSE) stands at Sh57.6 billion from 20 bonds issued by 12 companies, a significant drop from the Sh71.28 billion registered in August 2014 when Kenya had 28 listings.
