Family Bank has fully settled the interest and principal of the Sh2.019 billion medium-term note that it borrowed five years ago to fund growth.
The lender said Tuesday the bondholders have now been paid the full amount with the accrued interest of the final six months, having come in on Monday.
“We wish to thank the investors who participated in the medium-term note. The note supported the bank in its expansion plans and served to strengthen the capital base to be able to increase lending to medium and small-sized enterprises,” said Rebecca Mbithi, Family Bank chief executive.
The bank issued the bond in three tranches of Sh1.297 billion, Sh600.8 million and Sh120.4 million and was arranged by Faida Investment Bank and NIC Capital.
The mid-tier lender tapped into the bond market in September 2015 to raise money for branch expansion, investment in ICT software, loan book growth and strengthening its capital base.
Family Bank’s redemption of its medium-term notes now leaves the value of outstanding corporate bonds trading on the Nairobi Securities Exchange (NSE) at below Sh19 billion.
There were just five such debt instruments valued at Sh19.1 billion as of December, down from 20 bonds valued at Sh61.9 billion at the end of 2018.
The outstanding bonds include those issued by Stanbic Bank, NCBA, East African Breweries and Real People and Centum Real Estate Limited.
Activity in the corporate bond market in the years leading to 2015 was fairly active until defaults and fraud by Chase Bank and Imperial Bank hurt investor confidence and subsequently discouraged new debt issues.
Centum Real Estate’s Sh2.96 billion and Acorn Project’s Sh2.03 billion bond that were issued last November and October respectively marked the latest additions on the NSE but were both marked by under subscriptions.
Investors are still seeking recourse on their Sh4.82 billion and Sh2 billion Chase and Imperial bonds respectively after the two banks sunk into receivership.
Other firms in which debt investors have lost money include Nakumatt Supermarkets, Athi River Mining Cement and Kaluworks.
With reduced enthusiasm for corporate bonds, companies have turned to alternative sources of funds to fuel their growth.
These include taking loans from local banks and development finance institutions and shareholders besides selling stakes to private equity firms.