Category Archives: NSE bonds

Scooping Money from Investors

Seems like there are not enough investments to satisfy local debt & equity investors in Nairobi.

NSE IPO: The Nairobi Securities Exchange (NSE) IPO with 66 million new shares offered to the public, was oversubscribed by 687% in the retail pool, and the NSE now has 17,883 shareholders, up from 24 before the IPO. Local retail investors were allocated 41% of the shares, local institutional 34% and foreign investors received 23%.

Britam bond: BritAM whose 13% Kshs 6 billion bond started trading last month had a 144 per cent over-subscription netting Kshs. 7.323 billion. This was after invoking a green shoe option on the Kshs 3 billion targeted and exercised (the green shoe was for another Kshs 3 billion) which allowed Britam to retain Kshs. 6 billion.

NIC bond: Offered at 12.5%, the bond received offers of Kshs 6.5 billion, representing a 30% oversubscription over the upsized amount of Kshs 5 billion. Institutional investors made up 90% of the applicants, and retail were 10%.

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Kenya Euro Bond A to Z

Excerpts from the prospectus for the ‘Euro bond’ being floated by the Kenya Government.

Advisors: Include two Kenyan law firms (Kaplan & Stratton, Anjarwalla & Khanna) and 3 UK ones. Citibank are the registrars and paying agents and lead managers are Barclays, JP Morgan, QNB, Stanchart and Dyer & Blair is a co-manager. The prospectus notes that while no person has a material interest in the offer, the advisers may perform banking transactions with the Kenya government.

Also, the Kenya High Commission in London is the processing agent and the Court of International Arbitration in London will resolve bond investor disputes.

Anglo Leasing There is mention of the status of 18 contracts unearthed following a passport deal that was found to be irregular. The prospectus notes that 4 worth Kshs 19B were canceled (with Kshs 1B recovered?!), and 3 worth Kshs 6.8B were completed. Of the other 11 worth Kshs 30 billion, 2 were settled directly, 2 received payments of $16.4M in May 2014 after a court judgment, 6 had not started (but what happens?), and on the last one (security equipment to the NIS) the company has made a demand of Kshs 3B but has not sued. China: Few mentions about the country in terms of trade balance, debt, and the railway.

Denominations: The bond is issued in denominations of $200,000 (~Kshs 18 million)

Dublin: The bond will be listed on the Irish Stock Exchange

Euro Bond: The phrase does not exist in the document

Interest Rate is not stated

Investors: The offer is meant for qualified institutional investors (QIIs) and bond notes may not be issued offered or sold in Kenya, South Africa, Qatar, UAE, Singapore, Hong Kong, or the USA.

Debt Performance: Total debt at the beginning of 2014 that is owed by the Kenya (central) government was $24 billion. Debt service is expected to drop from Kshs 200B this year to about Kshs 150 billion for the next two years.

Also, the Kenya government believes its current account deficit of (cited at $3.7 billion) is overstated citing, among other reasons; the shilling has remained relatively stable, the measures excluded unclassified services (which have quadrupled) and the amount of foreign direct investment (FDI) is under-reported (by up to 50%?!)

The government has guaranteed debts to among others; Kengen – $250M, Kenya Ports – $140M, Kenya Railways – $45M and the Kenya Broadcasting corporation $39M. Kenya has a history of debt re-schedules at Paris (1994, 2000, 2004), and London (1998, 2003) and has had some debts canceled by China, Holland, and Finland

Purpose: Funds will be used for infrastructure projects and to pay off a $600M loan that matures in August 2014. Some major infrastructure projects include railway expansion (new wide gauge railway will be built in 3 phases at a total cost of $13 billion) LAPSSET (with a new port at Lamu, railway, road, oil terminal & pipeline and resort cities at Lamu, Isiolo, Lake Turkana), 4 dams at a cost of $16.8 billion and the replacement of the Mombasa-Nairobi oil pipeline.

Risks Insecurity is cited. Another is the ICC (International Criminal Court) cases for which the political implications of a conviction cannot be predicted. Taxes Payments will be made to bondholders without deducting any withholding taxes. However, the prospectus has tax advice for US, UK and Kenyan investors who may be interested in buying the bonds. For Kenya investors, interest payable on the Notes has been exempted from income tax – but that is yet to be approved by parliament, who may revoke that)

Euro bond document found via @alykhansatchu

More at the WSJ who expect the Euro bond rate to be at about 7%

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Shares Portfolio February 2012

Comparing to last quarter and a year ago.

2007 was considered a wait & see year for firms in Kenya and 2012 looks to be the same with elections set for sometime in the last third of the year. Banks are expected to announce profits this month, amid allegations that some of their gains were due to lax oversight by the Central Bank which may also have contributed to the weak Kenya shilling late in 2011. Local news is dominated by electioneering, loan rates are above 25% and it’s expected to be a challenging year for Kenya Airways, Safaricom and other companies as well.

The Stable
Barclays ↓
Bralirwa (Rwanda) ↓
Britak ↓
Diamond Trust Bank ↓
East African Breweries (EABL) ↑
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↑
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↓
Uchumi ↓

Review
Best Performer: EABL (up 12.9% in 3 months), Safaricom, KCB
Worst Performer: Stanbic Uganda (down -28.8% in 3 months), Britak, Uchumi
In: None
Out: None
Increase: KCB, KQ
Decrease: none

Unexpected gains/losses: Last week, Barclays announced special dividend to go a long with a final dividend. Similarly, Williamson Tea announced a record interim special dividend of Kshs. 50 ($0.55) per share following the sale of their building.

ION two companies at the NSE – East African Portland Cement and CMC Group
appear to have imploded from the inside with board wrangles disrupting the company operations and leading to both being suspended from the NSE.

Events/Outlook: The portfolio excluding new shares is down 4% from last November, while the Nairobi Shares Exchange main index is down 9% over the same period.

Looking Forward to:
1. Investing in Government bonds – the government was selling a 30 year savings bond that paid 12% and targeted to raise Kshs. 18 billion with a minimum investment of Kshs 50,000 ($615), and this month, there’s a tap sale of 12 year infrastructure bond 12 year as the government seeks to raise Kshs 17.7 billion ($196 million). Minimum investor amount is Kshs. 100,000 ($1,111) and the average yield has been 16.6%
2. Kenya Airways rights issue
3. Any other new listings at the NSE.

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Shares Portfolio February 2011

A tale of Two Brewers – comparing shares to November 2010 and a year ago

The Stable

Bralirwa (Rwanda) ↑
Diamond Trust Bank ↑
East African Breweries (EABL)
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↓
Safaricom ↓
Scangroup ↓
Stanbic (Uganda) ↑
Uchumi ↔

Review:
– Best performer: Bralirwa up 31% since their 2010 IPO
– Worst performer: Scangroup (down 14%), then EABL
– In: Bralirwa
– Out: None
– Increase None
– Decrease: None
– Unexpected gains/losses: – Uchumi shares have not been re-listed despite the company’s exit from receivership a year ago

Events & Outlook: – Performance: The Portfolio is down 3% in the last three months while the NSE Index is down 6%
-Bralirwa Rwanda was a good buy as the Rwanda (virtual monopoly) beer company listed shares that were open to all East African nationals and many retail shareholders got full allocation (still waiting for a similar offer from Tanzania); However in Kenya EABL faces challenges from the so-called Mututho Law which appears to have curtailed sales of alcohol through reduced hours.
– Safaricom seem to be weathering the storm from Airtel Kenya and their battle has extended to political and regulatory circles. Airtel added only 2 million more customers in all Africa compared to a year ago (Dec ’09)
– Kenol has gone quiet since the Kenya Government instituted price controls around the country and despite popular expectations, prices have steadily risen in the two months since the program started.

Looking forward to: – February brought news that Transcentury and Britak – British American insurance plan to list at the stock exchange this year. Britak, Kenya’s 4th largest insurance company looks more likely – it had a 2009 pre-tax profit of Kshs 500 million and assets of 15 billion ($185 million). Transcentury shares trade at an OTC market run by Dyer & Blair – and (this week) are at Kshs 35 per share compared to Kshs 48 in 2010 according to the East African.

CIC Insurance, CFC Life and Family Bank are silent, while government linked companies like New KCC, Consolidated Bank, and National bank, are also likely to go through more political hoops before they reach the market.

– Also on offer this month is a 30 year savings bond from the Central Bank of Kenya to promote savings in the country. It pays 12% per year and targets to raise Kshs 18 billion ($221 million) with a minimum investment of Kshs 50,000 ($615), and closes on. Exactly two years ago, there was a similar push for an infrastructure bond offered by the Kenya Government to raise 18.5 billion ($231 million) by offering investors 12.5% returns over 12 years.

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This time around: Kenya Stockbroker collapse, Report leaks, Credit Reference Live

Time for another this time around post which looks at stories that recur in the business environment

Mars Group Kenya: The an anti-corruption watchdog group is the wikileaks for Kenya, re-publishing hitherto top-secret government reports at their website.

Mars Group research and produce their own reports, but their archives contain a growing list of reports of corruption in Kenya that is worth checking out. This week they have reports done by PricewaterhouseCoopers for the government of Kenya on the collapse of Triton Oil Company and on the misuse of funds for Maize famine relief in 2008. Last month they also released the report on the sale of the Grand Regency hotel. The Triton report shows that:
– At Kenya pipeline company (KPC) the oil collateral agreement was poorly drafted and ambiguous. Also managers had great discretion, procedures were lax /there was inter-departmental conflict (oil was released without verification) and documentation was poor (since documents would get lost at KPC, financers would exchange documents then present them all to KPC at once)
– Triton was aggressive with financing and would arrange for shipment before they got financing. They were stuck at some point and KCB entered into a finance agreement for goods when the ship was already in Kenya
– Bad banking Ecobank have no claim against KPC, while the Fortis claim against Triton is suspect. Also Glencore had stopped financing Triton in June 2008 as they were suspicious about KPC fuel stock claims
– KCB and other financiers did not cooperate with the PWC investigators
– The debt owed to KCB may be substantially lower than KCB claims and they have provided little information to assist in verification of the Triton debt.
– Kenya anti-corruption commission should investigate further staff named in the report

GoK Bond The Government of Kenya is going to raise Kshs 14.5 billion for infrastructure via a third infrastructure bond. How does that compare to a similar bond a year ago?
2009: Kshs 18 billion ($240 million), interest rate 12.5%, minimum bid Kshs 100,000 (~$1,250), maturity 8 years, principal repaid in 2015, 2017, 2021. Funds used for road, geothermal, water projects
2010: Kshs 14.5 billion ($188 million), interest rate 9.75% tax exempt, minimum Kshs 100,000, maturity 8 years, principal repaid in 2016, 2018. Funds used for water, sewer, irrigation, road, and geothermal projects
The 2009 bond was over-subscribed and the only notable difference in 2010 is the lower interest rate offered. The CBK has decided the high cost of loans offered by commercial banks and perhaps by offering the same banks a lower return on government bonds; they will offer more competitive borrowing rates to the public

Credit Reference: February has also seen the licensing of Kenya’s first credit reference bureau – CRB Africa by the bank regulator, the Central Bank of Kenya. Following this, commercial banks have apparently commenced sharing information with the agency. Some of the rules governing sharing of data were highlighted when the credit reference rules were gazetted almost two years ago. These include
– Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
– They may only share information for business decision making (evaluate credit prospects) and must keep track of all information they share
– Customers are entitled to one free report a year, and within 30 days of a negative referral.
– If a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer
So what information will they compile?
– For individuals: Name Citizenship ID / PIN Postal/ Telephone Credit history (as reported) Court judgments (as reported) Referees
– For companies: Company registration details postal/physical/telephone Credit history (as reported), Court judgments (as reported), Guarantees
Shareholdings/directorships

Stockbroker collapse: This month saw the placing of another stockbroker under statutory management – this time its Ngenye Kariuki Stockbrokers [Last year in March it was Discount stockbrokers that was placed under statutory management]

Despite strong defense from the Kenya Association of Stockbrokers & Investments Banks – KASIB who say the brokers problems were manageable and did not warrant the intervention of the authorities the broker was in a weak financial position.
A summary by Faida Investment Bank, based on the published un-audited results of Ngenye Kariuki showed this
Half year June 2008 versus 2009
June 08 income 35m, expenses, 21 million, pre-tax profit of 10 million
June 09 income 3 million, expenses 10, pre-tax loss of 11 million
Share capital of 50 million, capital reserves of 251 million (which many brokers draw from the sale price in 2006 of Francis Thuo stockbrokers) [and the same amount appears as an intangible asset) at June 2009, the broker had an overdraft position of 63 million and receivable of 127 million which KASIB is laying at the feet of Citibank for withholding funds from the 2008 Safaricom IPO that are owed to several stockbrokers.

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Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: NSE bonds

Scooping Money from Investors

Kenya Euro Bond A to Z

Shares Portfolio February 2012

Shares Portfolio February 2011

This time around: Kenya Stockbroker collapse, Report leaks, Credit Reference Live