Acorn green bond sale hits 85pc subscription

The country’s first green bond issued by property developer, Acorn Group and PE fund Helios has attained 85 percent subscription, raising Sh4.3 billion of the targeted Sh5 billion.

Acorn CEO Edward Kirathe said raising corporate bonds in Kenya is like “walking through a hurricane,” adding that they had set a modest target of Sh2 billion for the first tranche of the medium term note.

“The current bond market is very bearish and lack of confidence with what is happening with the other bonds. It was very useful to have ( British fund) GuarantCo behind us because it gave investors comfort that this is a good bond,” he said.

“We were pleasantly surprised because we had initially expected to raise Sh2 billion now and another Sh2 billion later, and then a final Sh1 billion.”

He said that the investor mix comprised about 30 percent each for pension funds, commercial banks and development financial institutions (DFIs), while insurance firms accounted for the remainder.

Jonathan Muga, the head of Stanbic Investment Banking who were the lead arrangers of the issue, said Kenyan bonds will have to enhance their credit risk profile if they are to stand a chance of being successful.

“It is important to tell your story clearly, cite the benefits, the risks, engage early on a non-deal roadshow and then follow up so that you can come back with interest in your offer,” said Mr Muga.

Investors have recently shunned Kenya’s corporate bond market following several defaults by issuers where billions have been lost.

This is after bonds risks rose following placement of Imperial Bank under receivership that froze Sh2 billion bond and a few months later Chase Bank went under with an outstanding Sh4.8 billion bond.

The green bond will be tax free following changes in the Finance Bill 2019, joining infrastructure bonds which are also tax exempt.

Mr Kirathe said the money will go into funding its low cost student hostels known as Qejani, that will charge Sh6,380 (£50) a month, to lock in university students.

“We have a number of strong partnerships with key universities such as University of Nairobi, KCA University, Strathmore University and USIU. In some of them we are the official accommodation provider, like UoN,” said Mr Kirathe.

Acorn is targeting two Qwetu hostels on Thika road to serve United States International University Africa, Kenyatta University and Jomo Kenyatta University of Agriculture and Technology students in the Kasarani area.

Sirona (Phase 1 and 2) hostels will serve University of Nairobi, Strathmore University, KCA University, Daystar University and Riara University, while Bogani East Road Qwetu and Bogani East Road Qejani will serve Catholic University of Eastern Africa.

Nairobi West Qwetu will serve several universities and colleges including Strathmore University.