Nairobi, February 22, 2022-The Kenya Mortgage Refinance Company’s (KMRC) inaugural corporate bond has attracted a 480 percent over-subscription and a total performance rate of 579.6 percent, denoting success in the home loan re-financier’s quest to build its issuer credentials.
Results issued show that the first tranche of Kes1.4 billion, under the Kes10.5b Medium-Term Note (MTN) Program, netted applications worth Kes 8.114 billion.
This outcome means that after taking the Kes1.4 billion it had sought in its first foray into the local capital markets, KMRC will literally be leaving a substantial Kes 6.714 billion on the table, denoting impressive liquidity in the market. The issue did not have a green-shoe option.
The MTN, which was available to investors with a minimum investment of Kes100,000 and subsequent multiples of the same amount, was on sale over a two-week window, which ended on February 18, 2022. The interest on the corporate bonds, payable two times per year at 12.5 percent, was its strongest selling point, being a premium above the yield on comparative Government Paper of the same tenor.
“The success of this first issue represents a resounding validation of our business model and strategy by investors. The cash raised will enable us to blend our inventory of concessional funds and therefore substantially scale up our operations, as we seek to re-finance more home loans and make them affordable and within reach for more Kenyans. This success will certainly provide KMRC with a positive track record which is critical for opening the door to what will be an active pipeline of bond issues, going forward,” said KMRC CEO Johnstone Oltetia.
Since it received its operating license from the Central Bank of Kenya (CBK) in September 2020, KMRC has relied exclusively on concessional funds from the World Bank and the African Development Bank (AfDB), the continental development finance institution (DFI), for long-term capital. KMRC has so far accessed Kes6.5 billion from the two DFIs through the National Treasury and refinanced qualifying home loans from participating PMLs with rates on the refinanced loans coming down to single digits (below 10 percent), materially lower than previous average rates of 12 percent.
The KMRC is resolving the asset maturity mismatch that has been blamed for high interest rates on home loans in Kenya. The Company mobilizes long-term funds, which it then on-lends to participating lenders, which include commercial banks, savings and credit cooperatives (SACCOs) and microfinance institutions (MFIs). The lenders are then able to match the maturities of the long-term credit available to them from KMRC with the home loans they offer to borrowers, resulting in lower interest rates, hence driving affordability.