Mortgage financier HF Group is set to borrow Sh1.5 billion as part of a cash mobilisation plan to repay its Sh7 billion corporate bond which falls due on October 2.
The Nairobi Securities Exchange-listed firm says it has Sh4.1 billion on hand and plans to raise the balance of Sh2.9 billion from borrowings and monthly cash collections from its lending and property development operations.
“We plan to borrow about Sh1.5 billion from a development finance institution (DFI) in the next two months,” HF’s chief executive Frank Ireri told Business Daily.
He added that the remaining amount will be raised from normal operations.
Mr Ireri said taking a loan from a DFI is significantly cheaper than issuing a new corporate bond.
East African Breweries (EABL) recently went to the market seeking to raise Sh6 billion through a five-year corporate bond offering 14.17 per cent interest.
This is the first time a company has issued a bond after investors were jarred by the collapse of Imperial Bank and Chase Bank which had raised a total of Sh6.8 billion.
HF raised the Sh7 billion in two tranches in 2010 at cheaper rates when markets were more accommodative, with corporates bonds typically oversubscribed.
The company raised Sh5.86 billion at an annual fixed interest rate of 8.5 per cent.
The other 1.16 billion was issued at a variable rate of the coupon on the latest 182-day T-Bill plus a margin of three per cent, subject to a minimum of five per cent and a maximum of 9.5 per cent.
HF’s bond is nearly 10 per cent of its total assets, with the company adopting a more conservative dividend policy ahead of the upcoming redemption of the debt.
The lender declared a dividend of Sh0.5 per share on the results for the year ended December, amounting to an aggregate payout of Sh176.2 million.
This is down from the previous year’s dividend of Sh1.3 per share totalling Sh453.1 million, saving the lender Sh276.9 million.