Pension funds are the main buyers of the EABL bond which raised 11 billion shillings

Capital markets

Pension funds are the main buyers of the EABL bond which raised 11 billion shillings


Jane Karuku, Managing Director of EABL Group. PICTURES | FILE | NMG

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Summary

  • Pension funds were among the main buyers of the corporate bond issued by East African Breweries Plc (EABL) in October last year.
  • The brewer’s bond was more than three times oversubscribed, reflecting investor confidence in the Nairobi Stock Exchange-listed company.
  • Investors offered a total of 37.9 billion shillings, with EABL taking only 11 billion shillings that it had planned to raise.

Pension funds were among the top buyers of the corporate bond issued by East African Breweries Plc (EABL) #ticker:EABL in October last year, a move that more than doubled their investment in debt sold by private companies for 6.8 billion shillings.

Before the brewer raised the funds, the corporate bond market had shrunk considerably due to defaults and fraud which had seen many companies avoid refinancing or selling new debt through fixed income instruments.

“Investment in listed corporate bonds also increased by 134.59% from Sh2.9 billion in June 2021 to Sh6.8 billion in December 2021,” the Retirement Benefits Authority (RBA) said in its latest annual review of the pension sector.

“This is partly attributed to the investment in the EABL Domestic Medium Note which attracted oversubscription.”

The brewer’s bond was more than three times oversubscribed, reflecting investors’ confidence in the Nairobi Stock Exchange listed company #ticker: NSE.

Investors offered a total of 37.9 billion shillings, with EABL taking only 11 billion shillings that it had planned to raise. The five-year guarantee has an interest rate of 12.25% payable semi-annually.

The company’s debt is the largest among those listed on the NSE, followed by the 3.9 billion shillings Family Bank bond paying a fixed interest rate of 13%.

The Kenya Mortgage Refinance Company (KMRC) is set to be the biggest issuer of bonds in coming years following its first offering which raised 1.4 billion shillings in March.

The success of the EABL bond shows that bond investors are willing to support companies with high credit ratings.

Demand for corporate bonds has generally been strong, with some of the issuers offering little or no premium over the yields offered by risk-free government bonds.

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