Centum Investment Co. is selling Kenya’s first equity-linked notes as the company funds an expansion in financial services, real estate and energy.
Centum is offering 6 billion shillings ($62 million) of five-year, fixed-rate bonds at 13 percent and equity-linked notes that will be traded on the Nairobi Securities Exchange’s fixed-income market, the company said in a statement on Monday. The equity-linked notes will pay 12.5 percent plus a variable component of as much as 10 percent should Centum’s net asset value increase by 25 percent when the securities mature.
Kenya’s biggest publicly traded investment company has doubled assets since 2012 to almost 37 billion shillings, with interests spanning fast moving consumer goods to agriculture and plans to diversify into healthcare, education and information, communication and technology by 2019. Dyer & Blair Investment Bank Ltd. and Equity Investment Bank Ltd. were appointed as lead transaction providers on the deal.
“During roadshows, on talking to institutional investors, they expressed a willingness to acquire more equity from Centum, rather than the bonds,” Steven Mathu, a corporate finance analyst at Dyer & Blair, said by phone from the capital, Nairobi. “In order for them to still get funds from institutional investors they had to look for a way of enticing them and this is how they came up with the idea of issuing a bond that has equity participation.”
It will be the first equity-linked note issued in the East African country in which the variable component of the paper will be separately listed and tradable, Centum said in the statement. The sale opened Monday and will close on June 5. Centum’s Director of Finance and Operations Risper Mukoto was not immediately available for comment.
Demand for similar transactions will “all depend on the willingness of the issuers to allow bondholders to participate in the upside of the company,” Dyer & Blair’s Mathu said.