SAFARICOM OFFERS BOND TRANCHE AT 12.25 PER CENT
8 Oct 09
Mobile phone company Safaricom announced the first tranche of its Sh12 billion bond offer with its pricing designed to beat the comparable listed corporate and treasury bonds. The Sh5 billion five-year tranche will have a fixed component offering a coupon of 12.25 per cent against the corresponding 5-year treasury bond of 9.50 per cent, making for a premium of 2.75 percentage points.It, therefore, means that an investor making the minimum investment of Sh1 million will earn Sh122,500 annually from the investment if he goes for the fixed income segment. The floating rate component will be priced at 1.85 percentage points above the prevailing 182-day treasury bill. If the 182-day T-bill standing at 7.99 per cent at the beginning of this month continued to prevail in the next interest payment date, then an investor would receive 9.84 per cent return on their investment.On the other hand, if the T-bill interest rate rose, the investor would realise a higher return, but if it went down, he would receive a lower return. In an environment where an investor expects interest rates to rise, the floating rate would provide a proportionately rising rate of return. An investor who would not want to worry about the interest rate movements and would want to have a fixed return would go for the fixed component. During the launch of the bond yesterday, CEO Michael Joseph said: “We are extremely bullish about this bond. The conditions and pricing are right and we are confident that the market will endorse our overall strategy by taking it up. Safaricom will be using the funding for general corporate purposes including rollout of some critical projects.” A notable aspect of the corporate bond offer is that it is mainly targeted at institutional and high networth individuals who can afford Sh1 million minimum subscription required. The majority of retail investors, who may have applied for the recent KenGen public infrastructure bond (PIBO) that asked for a minimum of Sh100,000, may this time round find themselves shut out of the bond offer.
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