Nairobi, 1 September 2010
The Capital Markets Authority (CMA) has approved the issue and listing of a KES10bn Medium Term Note by Housing Finance. In a letter signed by the Authority’s Chief Executive Officer, Ms. Stella Kilonzo, the regulator states its satisfaction with Housing Finance’s application and full disclosure of material information in accordance with the requirements of the Capital Markets Act. The good news follows an earlier nod from the Central Bank of Kenya which indicated no objection to the issuance of the medium note.
The approval means that Kenya’s premiere mortgage financier can now embark on a medium-term note (“MTN”) program that enables the company to offer debt securities on a regular and/or continuous basis.
According to HF’s Managing Director, Mr. Frank Ireri, the medium term note program is part of the plan to source long term funding to bolster its growth of business in form of mortgages and property financing. “The approval and consequent listing will provide the requisite financial gearing to enable Housing Finance play an integral role in helping boost the available supply of units with a number of major projects already in the pipeline,” he said. “In addition, we shall be playing an indirect role in the supply of these additional units by financing project developers sponsoring the initiatives. Contrary to earlier reports, the funds raised will not go towards the institutions’ capital but will form part of debt funding.”
The approval by the regulator is seen as a boost to Kenya’s market leader in the mortgage financing industry as it seeks to benefit from the growing demand for housing in urban and rural areas. The current demand is estimated at 150,000 units per annum with supply estimated at 35,000 units. With such a massive supply gap, the private sector is expected to play a critical role in meeting the shortage. Equally, there exists a huge funding gap as demonstrated by statistics from the central bank that show that lending by commercial banks and mortgage finance institutions to the sector as at the end of 2009 was KES9.2bn, while the private sector approvals to put up properties by the City Council in the year 2009 was valued at KES77.0bn.
In the coming weeks, the mortgage financier is expected to issue its final information memorandum and a pricing supplement that will provide requisite guidance to investors in respect to each proposed tranche. The company has already named Standard Chartered Bank Limited and NIC Capital Limited as the joint lead arrangers for the program.
According to analysts and several stockbrokers, the positive growth of Housing Finance’s top line and bottom-line, company strategy, scope for revenue generation due to housing demands and a healthy appetite for fixed income security by investors provide an excellent recipe for the success of Housing Finance’s funding solution which is in tandem with its business model.
The mortgage financier’s model seeks not only to provide mortgages that enable more Kenyans to own homes, but also play a leading role in enabling a steady supply of quality and affordable property and homes in the sector
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