Sh18bn Centum, EABL payoff blow for bonds market

Some Sh18 billion worth of listed corporate bonds issued by Centum #ticker:ICDC , EABL #ticker:EABL and Commercial Bank of Africa mature next year, further weakening a market segment that has been inching towards oblivion for the past five years.

Following a raft of maturities this year, which retired Sh19 billion debt, the ailing market segment has been left threadbare as companies turn to other avenues to raise capital due to loss of public confidence in the bonds.

This has left the CMA scrambling to find new ways to revive the segment, whose monthly average traded turnover in the secondary market this year was about Sh315 million, compared to Sh56.4 billion for government bonds.

One of the avenues the CMA is eyeing to revive the segment are bonds in the real-estate sector, with encouragement in form of the unlisted September green bond by property developer Acorn Group and PE fund Helios that raised Sh4.3 billion of the targeted Sh5 billion.

“The recent establishment of the Kenya Mortgage Refinancing Company (KMRC) is further expected to deepen the bond market after it leverages on capital markets to raise funds through bonds for on-lending to banks and other mortgage financing companies,” said CMA in its market soundness report for the third quarter of the year.

On its part, the NSE is looking for large external issuers (such as the AfDB) to put out a local currency bond, which would act as a vote of confidence in the market, and for guaranteed bonds, which would address investor fears of loss of money.

Kenya’s corporate bond market, which has had no new listing since April 2017’s Sh6 billion EABL bond, had a portfolio size of Sh71.3 billion and 28 listings five years ago.

By the end of 2020, this will have shrunk to Sh19.5 billion, which is inclusive of Sh6.82 billion non-performing bonds issued by the collapsed Imperial and Chase banks.

NIC Bank (Sh5.52 billion), CIC Insurance (Sh5 billion), HF Group (Sh2.97 billion), KenGen (Sh3.13 billion) and UAP Holdings (Sh2 billion) all saw their papers mature this year, with all of them opting not to refinance through the capital markets.

In March 2020, the brewer EABL will see its Sh5 billion, five-year paper mature, this being the first tranche of a Sh11 billion bond programme, with the second Sh6 billion tranche maturing in March 2022.

Centum will retire its Sh6 billion, five-year paper next June, while CBA (now merged with NIC Bank to form NCBA Bank) has its Sh7 billion, six-year bond maturing in December 2020.

Centum CEO James Mworia disclosed earlier this month that the firm will be paying off its bondholders using proceeds of residential apartments and land sales.

CIC Insurance adopted a similar strategy, paying off its bond holders using cash reserves in October and hoping to replenish the balance sheet with proceeds of a planned sale of 712 acres of land in Kajiado and Kiambu counties.