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IFC to buy US$36m of Kenya Mortgage Refinance Company’s bonds

KENYA – The International Finance Corporation (IFC) is set to buy US$36.97 million (KSh4.2 billion) worth of bonds issued by Kenya Mortgage Refinance Company (KMRC), becoming one of the largest debt investors in the firm.

This announcement comes after KMRC kicked off its fundraising last month when it raised KSh1.4 billion in the first of a series of bond sales that will ultimately raise an aggregate of KSh10.5 billion.

“IFC will serve as an anchor investor in KMRC’s first medium-term note programme of up to KSh10.5 billion (US$93 million) by purchasing up to 40 percent of the bonds,” the institutional investor said.

To this end, the global financier says its board of directors has approved an estimated total investment of US$36.97 million (KSh4.2 billion).

IFC indicated that it participated in KMRC’s first bond sale, committing US$5.5 million (KSh628 million) to the transaction which was oversubscribed nearly six times as investors placed bids of KSh8.1 billion.

“IFC is expected to provide up to US$5.5 million (KSh628 million) in the form of a local currency facility to support the first issuance (approximately US$12 million) of a bond by KMRC that will contribute to improved access to competitive housing finance,” the global financier said in a statement.

KMRC’s maiden bond has a fixed interest rate of 12.5 percent and a life of seven years. The bond’s principal will however be paid down annually, meaning the average time the debt will be outstanding is 4.5 years.

The funds will be used to supplement the company’s existing capital that was raised from the World Bank and African Development Bank (AfDB) via the National Treasury and other shareholders.

The funds will be on-lent to banks and other financial institutions at five percent interest, allowing them to offer their customers long-term mortgages at single-digit, stable interest rates.

Besides buying KMRC’s bonds, the global financier is also a shareholder in the company.

“In May 2021, IFC disbursed US$2 million equity (KSh228 million) investment in KMRC for a 12.3 percent stake. IFC’s stake has since been diluted to 11.8 percent with the entry of other shareholders,” the institution said.

Other KMRC shareholders are the National Treasury, Shelter Afrique, 11 saccos, eight commercial banks including KCB and Co-op Bank and one microfinance bank.

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