Family Bank’s first tranche of Sh10b bond goes on sale

Mid-tier lender Family Bank Wednesday put on sale its Sh10 billion bond as the bank looks to raise money to support growing loan book.

Family Bank initially wants to raise Sh4 billion for 5.5 years, with the option of taking an extra Sh2 billion, in case of high demand.

The bank plans to use the amount raised for regional expansion and to strengthen its capital base to be able to compete with industry leaders such as Kenya Commercial Bank, Equity Bank, Co-op Bank, StanChart and Barclays.

“Our five-year strategic plan sees us having a very strong presence in the region as well as playing in the big league in the local market as a tier one bank,” explained Mr Winfred Kiboro, Family Bank CEO.

“At 31 we feel that Family Bank has come of age and we are growing at more than twice the industry average and this expansion rate requires a lot of capital,” he said.

The unsecured multi-currency medium term note allows the bank to draw funding from the bond by expanding it if oversubscribed.

Faida Investment Bank and NIC Capital Limited have been appointed joint lead transaction advisors and placing agents for the Offer.

“There are various uses of the Sh6 billion that we are raising,” said Maurice Opiyo, managing director NIC Capital.

Capital base

The fixed-rate component of the bond offers a coupon of 13.75 per cent and is discounted, said Opiyo. He said the floating rate component of the bond will be priced at 250 basis points above the yield of the 182-day Treasury bill, within a set range.

“But it comes at a floor price of 12.5 per cent, and we have capped that rate at 17 per cent,” he said.

Yields on Kenyan Treasury bills jumped to around 20 per cent last week mainly due to the central bank’s tightening stance.

The third component of the bond, known as the mixed-rate portion, will offer a coupon of 14 per cent, with a potential rise based on the appreciation of the bank’s shareholder funds. Family is privately held.

The lender, which secured approval for a Sh10 billion multi-currency bond last month, plans to use two thirds of the targeted funds to boost lending, while the rest will fund new branches, new technology and expansion into neighbouring markets in East Africa. The bond will be on sale for two weeks.

Family, which started as a building society before developing into a commercial bank, now has assets of Sh75 billion. “Sh4 billion will go towards business growth lending and support of the capital base while and entry into other markets will take up Sh1 billion and another Sh1 billion for expansion of the branch network and infrastructure development,” Opiyo said.

Family Bank is just the latest in a long list of commercial banks in Kenya that are turning to the debt market to raise capital.