22 February 2014

Kenya: EADB Plans Bond Issue to Finance Projects in the Region

East African Development Bank is set to issue a new bond "in the course of this year" to raise funds for onward lending to projects across the region, it has disclosed.

The bank owned by four East African member states - Kenya, Tanzania, Uganda and Rwanda - however did not state the size of the debt note, but will raise at least Sh2 billion in the first tranche, according to director-general Vivienne Yeda.

"It's a very large bond, which will be issued in phases. It will cover financing for various sectors: we do agriculture, infrastructure, housing, transport, education, rural developments... we are a development bank with a broad operational scope," Yeda said on Thursday.

The bank has invested about $25 million (Sh2.15 billion) in construction projects in Kenya, 27.8 per cent of the $90 million (Sh7.76 billion) it has channelled into the regional construction sector over the past couple of years.

"Our exposure in Kenya includes projects in housing, commercial property, farming, agriculture, education and transport. We are very big in tea, barley and maize; we've financed two universities and several private schools, hotels and lodges, and purchase of trucks and small commercial aircraft," she said.

Yeda however declined to name the exact companies financed, citing client confidentiality, but said construction of a hotel in 2012 received a Sh600 million credit facility. It loaned Sh120 million to a local private university.

"We also do equity. We take an equity position in projects that we think have a huge impact," she said, naming Catalyst Fund as one of them.

EADB has entered into a co-financing deal with Housing Finance for construction of a joint venture housing project backed by the latter. It will extend a Sh620 million loan to the Sh1.5 billion development set on five acres at Kahawa Sukari on Thika Road. The joint venture dubbed Kahawa Downs will deliver 220 units of two- and three-bedroom, and a commercial block.

"Ours is more like wholesale financing and our resources are appropriately priced. We finance at below market rates to enable our clients pass on the benefit to end-buyers," Yeda said.

Burundi is expected to join the 37-year old regional development financier this year, being the only of the five East African Community members without a stake in EADB. "We are on course (on Burundi). Discussions are ongoing and should be finalised this year," she said.

EADB is partly financed by the states with stakes in it, but raises a large part of its funds through borrowing. The bank can finance up to $25 million (Sh2.15 billion) in a single project and does participate in government debts.

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