A medium-term note issued by NIC Bank in 2014 is set to mature, with the lender to pay out Ksh5 billion to bondholders early September.
The bond which is listed on the Nairobi Securities Exchange (NSE) will be paid out on September 9, with the bank having stipulated that the tranche’s payout will be at a 12.5% per annum fixed interest rate.
“We wish to notify the Exchange that the final interest payment and principal redemption of the NIC Bank medium-term note will be paid on Monday 9, September,” the bank wrote in a letter to the NSE.
Noteholders eligible for the payout will be those whose names appear on the Register of Bondholders as of August 30, the lender said.
At an outstanding Ksh5.5 billion, the notes have attracted a gross interest of Ksh358 million.
NIC also said that noteholders will receive information concerning the tranche through publications in the local dailies, via their personal email addresses and on the bank’s website.
NIC Medium Term Bond
Issued in August 2014, the NIC medium-term note was part of a capital-raising program initiated by the lender.
The debt issuance was initially issued at a sale of Ksh3 billion in what the bank at the time said was “to fund future business growth.”
“The cash raised will be critical in strengthening our capital base so as to underpin growth in our loan books for both the retail and business segments,” NIC Bank Managing Director John Gachora said in 2014.
The minimum investible amount in the bond, for noteholders, was Ksh100,000.
Under the medium-term note program, markets regulator Capital Markets Authority (CMA) allowed the bank to issue up to Ksh8 billion in subordinated notes over five years.
By September 2014, NIC had upsized its bond issue to Ksh5 billion.
“In the process of gauging investor interest, it became apparent there was greater demand in the bond issue than the original Ksh3 billion we were seeking,” said Gachora at the time.
NIC-CBA Merger
The maturing of the medium-term note also comes as the bank is in the process of merging with Commercial Bank of Africa (CBA) to form one of the biggest lenders in the Kenya banking sector.
Already, the merger has received regulatory approval including being exempt from tax in the share transfer deal.
In May, the Competition Authority of Kenya (CAK) approved the merger on condition that staff from both the Tier 1 Bank (CBA) and the Tier 2 lender (NIC) are retained for at least one year.
According to shareholder information, the merged bank will count among its top owners some of Kenya’s renowned billionaire investors and political figures.
The Kenyatta family currently holds a 24.92% stake in CBA while the Phillip Ndegwa family, which founded NIC Bank, has a 25% interest in the listed lender.
Businessman Naushad Merali will end up with a 2.9% equity based on his present direct ownership of a 5.6% stake in CBA.
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