Kenya's Safaricom small investors barred from bond offer

Safaricom retail investors have been locked out of the bond offer that opened on Wednesday.

This follows a pricing model that put a minimum of Sh1 million subscription amount for the fixed and floating rate public offer.

However, the offer is denominated at Sh100,000.

The first Sh5 billion tranche of the Sh12 billion, five year bond will have a 12.25 per cent fixed rate and a floating yield of 185 basis points above the 182-day Treasury-bill return.

This comes at a time when the participation of retail investors was picking up in the bond market of the Kenyan capital markets.

Recent offerings have been capped at Sh100,000 to attract the growing segment of market players.

On the basis of the pricing, indications are that the KenGen offer that closed last week was oversubscribed.

Whereas tallying is ongoing information has it that the offer netted over Sh20 billion against the expected Sh15 billion.

The Sh12 billion medium term note bond will be raised in five years with Sh5 billion being raised in the first tranche.

The remaining amount will be raised in April and September 2010.

This will be distributed as Sh5 billion and Sh2 billion respectively.

“The reason why we are doing this is because we do not need all the money upfront. We do not want to carry cash in our balance sheet that we don’t need,” explained Chris Tiffin chief financial officer, Safaricom.

Safaricom expects to utilise the proceeds of the bond offer to bolster its network operations across the country.

This is also expected to anchor their data service provision that currently is the focus of service providers.

The bond will pay a fixed rate of 12.25 per cent or a variable interest rate of 185 basis points above the rate on the 182-day Treasury bill, Anne Aliker of CFC Stanbic Bank Ltd., which helped arrange the bond sale, told journalists.