|
|
Kenya: I&M Bank in Sh600m Plan to Boost Capital Base
 |
|
|||||||||
|
||||||||||
Business Daily (Nairobi)
11 May 2008
Posted to the web 12 May 2008
James Makau
Nairobi
I&M Bank has announced a private offer for Sh600 million subordinated unsecured floating rate notes to shore up its capital base in an uncertain interest rate environment.
The issue, which is being arranged and placed by CFC Financial Services Ltd., will go towards raising Tier II capital for the bank for providing long term funding.
"We are raising cash for I&M's future strategic growth and expansion, both locally and overseas, as well as enhancing I&M's capital adequacy ratios in line with international Basel II Regulations," said Arun Mathur, I&M Bank's chief executive officer.
Floating Rate Notes (FRNs) are debt securities bonds, of any currency, that entitle the holder to regular interest coupons. FRN coupons are reset periodically to match the benchmark interest offered rate.
Typically the rate agreed is the benchmark rate plus an additional spread and is reset every three to six months. FRNs are generally issued by corporations wishing to raise funds for capital markets. Some FRNs may have special characters defined by the issuer such as mini-max coupons.
FRNs are typically traded by investors who expect interest rates to change. FRNs can be used to balance risks incurred through other interest rate instruments in an investment portfolio. They are sensitive to interest rate changes as the coupon moves in step with the changes for better or for worse.
The notes are being offered at floating interest rate of 1.75 per cent above the most recent 91 day Treasury Bill Rate with a floor of seven per cent and a cap of 11 per cent per annum and a tenor of seven years.
The closing date of the issue is June 9, 2008. With pre-tax profits of Sh1.294 billion and assets of Sh29.4 billion (as at December 31, 2007), I&M Bank is among the top 10 Banks in the country.
This comes at time when the bank is in need of further funding to enable it fast track expansion plans. Most local banks are on an expansion binge as they race to grow and maintain their market shares. The intended I&M expansion includes increasing its footprint across the region, widening its ATM network and making an entry into new business lines.
|
Apart from a 10 branch domestic operation, the Bank has recently made its first international footprint with acquisition of a 50 per cent stake in First City Bank in Mauritius. Last year, two international Development Financial Institutions (PROPARCO of France and DEG of Germany) came in as shareholders with a 12 per cent stake in the Bank.
According to the International Herald Tribune, sales of floating-rate notes are likely to surge to a six-year high in Europe as companies take advantage of demand from investors concerned about increasing interest rates.
The notes, whose yields pay a premium over benchmark bank interest rates that are reset periodically, made up more than half of all sales by nonfinancial companies last year.
| |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Copyright © 2008 Business Daily. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Make allAfrica.com your home page | RSS Feed | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Top | Site Guide | Who We Are | Advertising | Search | Subscribe | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Questions or Comments? Contact us. Read our Privacy Statement. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
