Family Bank retires Ksh.2B corporate bond


Family Bank CEO Rebecca Mbithi speaking at the lender's quarter 3 investor briefing on November 25 PHOTO | ...
Family Bank CEO Rebecca Mbithi speaking at the lender's quarter 3 investor briefing on November 25 PHOTO | COURTESY

In Summary

  • The redemption of Family Bank’s dual medium term notes on maturity will have the net effect of reducing outstanding commercial papers listed on the Nairobi Securities Exchange (NSE) as the counter struggles to attract new bond issuers.
  • According to data from the Capital Markets Authority (CMA), total outstanding issues at the end of 2020 stood at Ksh.21.9 billion, 24.2 per cent down from Ksh.28.9 billion.
  • The corporate bond market segment has remained subdued in recent years following as investors cut their appetite for the asset class following the non-payment of corporate bonds in Real People Kenya Limited (RPKL) and in defunct lenders Chase and Imperial.

Lender Family Bank has retired its Ksh.2 billion five and a half year tenured corporate bond after its maturity on Monday.

The bank has paid back both principal and interest accrued to bond holders over the last six months of the medium term notes (MTN) tenure.

Family Bank deployed proceeds from the bond to strengthen its capital base and enhance lending to small and medium enterprises (SMEs).

The redemption of Family Bank’s dual medium term notes on maturity will have the net effect of reducing outstanding commercial papers listed on the Nairobi Securities Exchange (NSE) as the counter struggles to attract new bond issuers.

According to data from the Capital Markets Authority (CMA), total outstanding issues at the end of 2020 stood at Ksh.21.9 billion, 24.2 per cent down from Ksh.28.9 billion.

The corporate bond market segment has remained subdued in recent years following as investors cut their appetite for the asset class following the non-payment of corporate bonds in Real People Kenya Limited (RPKL) and in defunct lenders Chase and Imperial.

Four board members of RPKL were recently fined Ksh.15 million by the CMA for their role in under-over-sighting the issuance of Ksh.1.6 billion whose proceeds were carted away from their originally intended purpose.

Currently, CMA board appointed Ad hoc Committee is probing Imperial Bank board members from their role in hiding away balance sheet deception which ended with the collapse of Imperial Bank in September 2015.

The collapse of Chase Bank in April 2016 has meanwhile locked in investor funds who had Ksh.4.8 bilion sunk in the lender’s corporate bond.

The capital markets regulator has been working on a insurance concept mimicking the Kenya Deposit Insurance Corporation (KDIC) which covers bank deposits by customers to cover corporate bond investors.

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Story By Kepha Muiruri
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