Kenya’s leading telecom giant Safaricom has raised 20 billion shillings ($155 million) from the first tranche of its corporate green bond after the issue was oversubscribed by 177%, the company announced Monday.
The five-year bond, which closed Friday, drew bids totaling 41.6 billion shillings against an initial target of 15 billion shillings. Safaricom exercised a 5 billion-shilling greenshoe option, taking the total raised to the maximum 20 billion shillings permitted under the tranche while staying inside the overall 40 billion-shilling medium-term note program approved by the Capital Markets Authority.
Investors will earn a fixed, tax-exempt coupon of 10.4% a year. The notes are scheduled to list on the Nairobi Securities Exchange on Dec. 16 and mature in December 2030.
Strong demand signals market revival
The oversubscription marks the biggest corporate bond by a listed Kenyan firm and has revived the Nairobi exchange’s long-dormant corporate debt market. Activity in the segment had nearly ground to a halt after a series of defaults, including those of Imperial Bank and Chase Bank soon after their bond issues, and a scandal at microlender Real People, which allegedly diverted 1.63 billion shillings in proceeds to its South African parent.
East African Breweries was the only other significant issuer this year, raising 16.7 billion shillings.
Funds earmarked for green projects
Proceeds from the bond — the first in Kenya to allow subscriptions via mobile phone using USSD code *483*810# — will be used to finance or refinance climate and environmental projects, including converting network sites to renewable energy.
Safaricom CEO Peter Ndegwa called the strong demand evidence of investor confidence in the company’s strategy and its commitment to sustainable growth.
Rising debt amid Ethiopia expansion
The fundraising comes as Safaricom’s borrowing costs rise, driven mainly by heavy spending on its Ethiopian operation. The company has budgeted 72 billion to 78 billion shillings in capital expenditure for the current financial year, including 18 billion to 21 billion shillings for Ethiopia.
As of September, Safaricom’s total debt stood at 117 billion shillings, with 61.2 billion shillings in long-term borrowings and 55 billion shillings in short-term facilities.
Despite the increased leverage, the telecom posted a 52.1% rise in half-year net profit to 42.7 billion shillings, fueled by double-digit growth at its M-Pesa mobile-money service and smaller losses in Ethiopia. An interim dividend is expected in February.
Government plans stake sale
The bond’s success coincides with a planned ownership change. The Kenyan government intends to transfer a 15% stake in Safaricom, along with future dividends on that holding, to South Africa’s Vodacom Group — already a 35% shareholder — in a deal valued at up to 244.5 billion shillings. The transaction, designed to ease pressure on public borrowing, still needs approval from competition and communications regulators as well as Parliament.
Safaricom shares were little changed in early Nairobi trading Monday.
