The insurance firm received bids worth 6.34 billion Kenyan shillings against an initial target of 3 billion Kenyan shillings, a 111 per cent oversubscription and will exercise a 2 billion Kenyan shillings green-shoe option.
CIC received bids from financial organisations, local institutional investors, the insurance sector and also the general public. According to Evelyn Wanjiku, research analyst at Genghis Capital, the East African country’s bond market has become very attractive to investors.
“I think bonds are a nice investment to get into, it is cheaper to get into compared to equity and they are going to give a return of 13 per cent. I think that is what drove investors to take up the bond,” Wanjiku said.
“It is a five year bond, when you are looking at 13 per cent compared to the normal treasury rate of 11 per cent investors will actually opt for the CIC bond and for them when you compare to the cost of debt the bond was the cheaper option for them and a wise thing to do.”
The insurance group will list the bond on the Fixed Income Securities Market Segment at the Nairobi Securities Exchange on 15 October. The proceeds are set to fund its regional expansion into Uganda, South Sudan and Malawi as well as investment in real estate.
“They [CIC] have an agreement with Malawi so far which is a good thing for them looking at the cooperative segment and they are planning to target the lower income segment by providing cheaper agricultural products and that is a positive on their side,” Wanjiku stated.
Earlier in the year, CIC signed a memorandum of understanding for a joint venture with the Malawi Union of Savings and Credit Co-operatives (MUSCCO) to start an insurance firm in the southern African country. The firm has set aside 800 million Kenyan shillings for a medical facility.
As a result of the oversubscription, CIC Insurance notched 1.4 per cent higher in yesterday’s trading at the Nairobi bourse.
The firm had initially intended to raise additional capital through a rights issue.