8 June 2018

Kenya: Chase Bank to Tap Into SBM Sh10bn Bond Issue

Chase Bank tops the list of intended beneficiaries of cash set to be raised by Mauritius-based SBM Holdings through two bond issues, sale documents show.

SBM is seeking more than Sh10 billion in fresh capital through ongoing sale of two bonds in Port Louse Mauritius, largely to support its regional expansion strategy.

The offer comprises a two billion Mauritius rupee (Sh5.92 billion), 10-year (local currency-denominated) bond, which offers a fixed return of 5.75 per cent a year and a seven-year $50 million (Sh5.04 billion) dollar-denominated bond with an annual return of 4.75 per cent.

The Mauritius rupee-denominated debt has a window to absorb up to 3.5 billion (Sh10.36 billion) in event of an oversubscription while the dollar paper has a green-shoe option of up to $100 million (Sh10.08 billion).

Expansion strategy

This means the Mauritian lender, which is targeting to use Kenya as beachhead for its Africa expansion strategy, could raise as much as Sh20.44 billion in tier-two capital through the bonds.

The sale opened on May 28 through June 25 and could close earlier if the target is met.

"Capital injection in SBM Bank Kenya (is) to cater for regulatory requirements with respect to increased business volumes, subject to completion of transaction--acquisition of carved out assets and liabilities in Chase Bank (in receivership)," SBM says in the prospectus.

The growth-hungry lender said on April 28 it plans to inject $60 million (about Sh6.05 billion) into Chase Bank this year, in addition to $26 million (about Sh2.62 billion) invested earlier.

The bank, whose shares trade on Stock Exchange of Mauritius, first entered the Kenyan market after acquiring bottom-tier lender Fidelity in 2016 at Sh100. It rebranded it to SBM Kenya in May 2017.

CBK deal

Its biggest catch in the Kenyan market, however, came after it reached a deal with Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC) last April to formally take over assets and liabilities of Chase Bank that are in the good books.

The deal was to see Chase customers access 75 per cent of the Sh76 billion deposits locked in the troubled lender in staggered phases over a period of three years.

SBM Holdings chairman Kee Chong Li Kwong Wing said in Nairobi on April 24 that large depositors in Chase could start accessing their cash from October.

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