Kenya: International Finance Corporation (IFC) to buy Sh4.2bn of mortgage firm’s bonds

The International Finance Corporation will buy $36.97 million (Sh4.2 billion) worth of bonds issued by Kenya Mortgage Refinance Company, becoming one of the largest debt investors in the firm.

The disclosure comes after KMRC kicked off its fundraising last month when it raised Sh1.4 billion in the first of a series of bond sales that will ultimately raise an aggregate of Sh10.5 billion.

“IFC will serve as an anchor investor in KMRC’s first medium-term note programme of up to Sh10.5 billion ($93 million) by purchasing up to 40% of the bonds,” the institutional investor said.

To this end, the global financier says its board of directors has approved an estimated total investment of $36.97 million (Sh4.2 billion).

IFC indicated that it participated in KMRC’s first bond sale, committing $5.5 million (Sh628 million) to the transaction which was oversubscribed nearly six times as investors placed bids of Sh8.1 billion.

“IFC … is expected to provide up to $5.5 million (Sh628 million) in the form of a local currency facility to support the first issuance (approximately $12 million) of a bond by KMRC that will contribute to improved access to competitive housing finance,” the global financier said.

KMRC’s maiden bond has a fixed interest rate of 12.5% and a life of seven years. The bond’s principal will however be paid down annually, meaning the average time the debt will be outstanding is 4.5 years.

The funds will be used to supplement the company’s existing capital that was raised from the World Bank and African Development Bank (AfDB) via the National Treasury and other shareholders.

The funds will be on-lent to banks and other financial institutions at 5% interest, allowing them to offer their customers long-term mortgages at single-digit, stable interest rates.

Besides buying KMRC’s bonds, the global financier is also a shareholder in the company.

“In May 2021, IFC disbursed $2 million equity (Sh228 million) investment in KMRC for a 12.3% stake. IFC’s stake has since been diluted to 11.8% with the entry of other shareholders,” the institution said.

Other KMRC shareholders are the National Treasury, Shelter Afrique, 11 saccos, eight commercial banks including KCB and Co-op Bank and one microfinance bank.