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Centum set to tap Sh4b from public

By John Otini
Thursday, December 3rd, 2020
Capital Markets Authority. Photo/Courtesy
In summary
    • Centum which is the holding Company for the Vipingo Development Limited launched 365 unit mixed use development called Pavilion Place Apartments located between Safari Park Hotel and USIU.
    • The bond is expected to will be listed for trading on the Nairobi Securities Exchange.

Capital Markets Authority (CMA) has given Centum Real Estate Limited the greenlight to borrow up to Sh4 billion from the public to invest in its real estate projects.

The regulator approved a non interest paying debt offering a discount  which is known as zero-coupon note.

It will also come with a special provision that allows the firm to raise a further Sh2 billion, than originally envisaged, in a move financial experts refer to as a ‘green shoe option’.

The 3-year, zero coupon note will be issued at a discount rate compared to the 3-year Treasury bond plus a market-determined margin, however, the investment is good for savvy investors though.

“The offer, a restricted issue, targets sophisticated investors who are sufficiently versed with the risks associated with the notes,” said CMA in a statement.

Medium term paper

The returns of the medium term paper will also be tied to the performance of the shares of the company, a characteristic normally described as equity-linked, and will mature after three years.

Proceeds from the issue will be used to fund real estate development by Centum Re, a subsidiary of Centum Investment Company Limited.

The senior secured zero-coupon notes will attract an indicative interest rate of 12.5 per cent whereas the senior secured zero-coupon equity-linked notes will generate an indicative interest rate of 12 per cent.

The senior secured zero-coupon equity-linked notes comprise an additional 2 per cent over and above the interest rate, if the company meets a minimum profit of 20 per cent exclusive of external factors such as inflation.

“Following review of the lender’s information memorandum, the Authority is satisfied that Centum Re Limited makes adequate disclosure of material information to enable investors make an informed decision on the offer,” the regulator said in  a statement.

Centum has approved a project pipeline of 4,426 residential units, of which the first phase of 2,000 units is either under construction or pre-selling.

Recently, the Company said it had handed over 96 homes in its Uganda and Vipingo developments.

The issuer has been assigned a short-term credit rating of A2 and a long-term rating of BBB+ from Global Credit Rating Company Limited, according to a statement on its short form prospectus.

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