Cash-strapped Family Bank has now resorted to corporate bond market in an attempt to raise Sh4 billion to fund its operations.
Further, Chief Executive Officer (CEO) Rebecca Mbithi said the bank plans to raise another Sh4 billion within the next five years in multiple transactions, raising the potential total debt issuance to Sh8 billion.
The 92-bracnch sized financially struggling lender returns to the debt market a month after redeeming Sh2 billion bonds in April.
The bank received approval from the Capital Markets Authority to raise the funds by way of a public offer.
According to insiders, the bank targets to raise KES 4 billion in its first tranche with the balance to be raised within the next five years in various tranches.
“We are positioning the bank for the second phase of growth as per our 2020 – 2024 strategy anchored on growth and stability of the bank. Through this capital raising, the bank is eyeing to strengthen its capital base to support lending to micro, small and medium-sized enterprises and heavily invest in technology infrastructure while diversifying our product and market offerings,” said Mbithi.
The corporate bond market has shrunk considerably in recent years after investors incurred losses from the defaults of Imperial Bank and Chase Bank.
The bonds will have a tenor of five years and their other features, including interest rates, will be set in the coming days.
“A specific pricing supplement shall be forwarded to the Authority for approval in respect of each proposed tranche to be issued,” CMA said in a letter approving the bond issuance.
Investors will apply for a minimum of subscription of Sh100, 000 and additional investments above that will be in multiples of Sh100, 000.
The lead transaction advisors are NCBA Investment Bank and Genghis Capital, PricewaterhouseCoopers (PwC)as the reporting accountants, MTC Trust and Corporate Services Limited as the Note Trustees, Mboya Wangong’u & Waiyaki Advocates as the legal advisors and Tim-Sky Media Services as the Media and Public Relations consultants.