Sh5bn of NIC corporate bond to meet Central Bank capital rules

NIC Bank will spend up to Sh5 billion it has raised through the recently issued corporate bond to finance expansion and meet higher capital requirements that have been introduced by the Central Bank.

The bond, which had sought to raise Sh3 billion, received bids worth Sh6.5 billion as investors’ showcased huge interest in the mid-tier lender.

The bank’s managing director, Mr John Gachora, said the bond issue is part of a major capital-raising programme in a bid to raise lending to corporate clients and enhance branch channels to reach more retail and small and medium enterprise (SME) customers across East Africa.

“This is a major milestone in support of our corporate strategy, which calls for robust capital levels and a sustainable funding programme. The money raised is critical in strengthening our capital base so as to support growth in our loan book for both the SME and corporate segments,” Mr Gachora said in a statement.

The bond issue, which is the first one under the Sh8 billion Medium Term Note (MTN) programme was upsized to Sh5 billion from the original Sh3 billion.

The bond received offers of Sh6.5 billion, representing a 30 per cent oversubscription over the upsized amount of Sh5 billion and has a yield of 12.5 per cent.

INCREASING APPETITE

“We saw a big appetite for the medium-term note with investors taking advantage of the opportunity. There is an increasing appetite and acceptance of corporate bonds as an alternative source of funding for Kenyan Companies,” NIC Capital’s managing director, Mr Maurice Opiyo, said.

The bank also plans to raise Sh2 billion through a rights issue subject to approval from the Capital Markets Authority.

The bond is to start trading on the fixed income segment of the Nairobi Securities Exchange on September 15.