Business Daily (Nairobi)
Emmanuel Were
4 May 2008
Housing Finance is set to raise additional capital in a rights issue after it secured approval from the Capital Markets Authority.
The mortgage lender will sell 115 million shares to existing shareholders at the rate of a share for every one held.
Housing Finance shares were last week trading at Sh42, meaning the volume on offer could raise Sh4.8 billion.
However, discounts of between 10 and 20 per cent characterise rights issues and analysts expect the issue to be priced above Sh35 per share, to achieve the target of Sh4 billion that the firm had set last year.
A rights issue gives shareholders in a company the first opportunity to buy new shares at a set price.
The number of shares reserved for each shareholder is determined by one's proportionate holding in the company.
Proceeds from the share sale will go towards supporting a number of recently launched mortgage products.
The money will also help the company improve its statutory liquidity ratio, an indicator of a company's ability to pay short term debts. Financial results for the year ended 2007 indicated that HF's liquidity ratio was 20 per cent, the minimum statutory requirement, having dropped from 26.3 per cent in a similar trading period last year .
The company's share registry closes a week from today, May 12th, indications are that HF will target the Sh70 billion expected as a result of the just concluded Safaricom IPO.
Also looking at targeting the same funds will be KCB that seeks to raise Sh5 billion from it rights issue.
"Strengthening our capital base is prudent and key to expanding offering to consumers in a rapidly developing property sector," said Housing Finance's managing director Frank Ireri.
Intense competition in the mortgage market has forced HF to come up with a mix of products to stay afloat. The products have required capital injection which has tightened the mortgage lenders liquidity.
Last year Housing Finance launched a 10-year fixed interest rate mortgage initially targeting investment groups wishing to put up houses either for owner occupation or speculative business.
First Africa Capital is the lead transaction advisor; CFC Stock Brokers and Standard Investment Bank the joint lead stockbrokers, while Housing Finance will be the receiving bank.
KPMG is the reporting accounting firm while Hamilton Harris & Mathews are the legal advisors.
Comprite Kenya Limited will manage the share register.
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