Treasury Slashes Corporate Debt Fees 10 Times To Spur Deals

The Treasury has slashed the total fees payable by an investor for corporate debt in the secondary market by times 10 as part of a strategy to spur activity in the segment.

A new pricing schedule by Treasury CS Ukur Yatani shows that investors now pay a total transaction fee of 0.0035 percent for corporate debts in the secondary market, down from 0.035 percent previously.

Kenya’s corporate bond market has witnessed a renaissance of issuances in the recent past, with the latest instrument floated by the Kenya Mortgage Refinance Company attracting bids worth Sh8.1 billion for a targeted Sh1.4 billion capital raise.

Other corporations that have issued bonds recently include East African Breweries Ltd (EABL), Family Bank, and Centum Real Estate.

EABL’s Sh11 billion bond was oversubscribed more than three times, pointing to renewed investor confidence in the previously troubled local bond market.

Investors bid a total of Sh37.9 billion in the issuing round, EABL said, representing an oversubscription of 275 percent.

Family Bank bond raised Sh4.42 billion, marking a subscription of 147.3 per cent, against a Sh3 billion target with a greenshoe option, an over-allotment option of Sh1 billion in its first tranche of the corporate bond offer via public placement.

Centum Real Estate Company listed its Sh3 billion project bond on the Nairobi Securities Exchange, allowing investors to trade the security before it matures in 2023.

The Capital Markets Authority (CMA) recently also published proposed rules that would allow more companies to list on the Nairobi Securities Exchange (NSE) to spur additional initial public offerings (IPOs) and reverse a six-year drought in transactions.

Kenya had its last IPO in 2015 when property investment fund ILAM Fahari I-Reit was listed on the NSE after raising Sh3.6 billion.

As part of the radical changes, the regulator has struck out an earlier rule that restricted IPO listings to public companies limited by shares and registered under the Companies Act.

A public company limited by shares is a legal entity that is separate and distinct from its members and directors or management.

“The issuer to be listed (in the main investment market segment) shall be a body corporate duly incorporated and or registered under the laws of Kenya. The issuer must have been in existence for at least five years”, the CMA says in draft regulations.

Should this proposal be adopted in the final regulations, the window for listing could be opened to entities registered under the Limited Liability Act 2012.

The regulator also proposes to relax a rule on the profitability of firms seeking to go public in the main investment market segment.