The Capital Markets Authority(CMA) has admitted that the corporate bonds market remains depressed. The regulator is thus working at resolving some of the issues that have made this market segment illiquid.
“A resolution of the issues in the bonds market to address the issues of insolvency especially for bonds that have not been listed will go a long way in instilling confidence in corporate bond markets,” said the Capital Markets Soundness Report (CMSR)Volume XVI, Q 3, 2020.
Firms wishing to float a corporate bond or commercial paper will be required to furnish the CMA with audited financial statements as well as a three-year business performance outlook.
These firms will also be required to disclose their level of indebtedness and tell of their intended use of acquired funds.
CMA is taking this route after thousands of corporate bondholders were left penniless following the collapse of Nakumatt Supermarket, Imperial Bank, Chase Bank, and Athi River Mining.
The CMA Soundness Report Q3 shows that corporate bond trading activity remains negligible, with only the NCBA and EABL Fixed Medium Term Notes being traded.
In Q2, the market remained illiquid, with CMA only granting one approval by Acorn Holdings Limited to issue and list a second drawdown of the notes by Acorn Project (Two) Limited Liability Partnership amounting to KSh 930 million under the approved medium-term note program of up to KSh. 5 billion.
According to CMA Quarterly Statistical Bulletin (QSB)-Issue 43/2020- for the period ended June 30th, 2020, the total outstanding amount for corporate bonds was KSh 27.93 billion.
This was a 17.68% decline from KSh 33.93 billion as at March 31, 2020, owing to the redemption of the Centum Bond Senior Unsecured Fixed Rate and Equity Linked notes in Q2 2020 worth KSh 6 Billion.
During Q2.2020, bond market turnover decreased by 13.11% in the secondary bonds market, with KSh 136.65 Billion worth of bonds traded compared to KSh 157.26 Billion traded in Q1. 2020.
A further comparison of Q2.2020 bond turnover with Q2.2019 indicates a 32.19% decrease from KSh 201.53 Billion recorded in Q2.2019 to KSh 136.65 Billion recorded in Q2.2020.
Activity in the corporate bond market remains depressed. This is after at least five firms that had issued a corporate bond, collapsed-leaving investors with junk bonds.
Nakumatt Supermarket, Chase Bank, Imperial Bank, and cement maker Athi River Mining (ARM) are among issuers who have collapsed with unpaid bonds or commercial paper.
Figures from the NSE and CMA show that commercial paper outstanding as of 30th June 2020 was KSh 27.9 Billion. These include the KSh 4 Billion Stanbic multicurrency medium-term note that matures on 8th December 2021.
The CBA fixed medium-term note has KSh 7 billion outstanding and matures on 14th December 2020. The EABL Fixed Medium-term note (second tranche) has an outstanding amount of KSh 6 billion, with this instrument maturing on 28th March, 2022.
Lender Real People’s Medium-term note issued a KSh 5 billion on 15th August 2015 with an outstanding amount of KSh 1.3 Billion to be redeemed, still outstanding.
The KSh 2 billion Family Bank medium-term note issued on 26th October, 2015 will mature on 19th April 2021.
The Imperial Bank Multicurrency medium-term note, worth KSh 2 Billion, matures on 21st December 2020, while the Chase Bank fixed medium-term note worth KSh 4.8 Billion issued on 19th May 2015 will mature on KSh 4.8 Billion.
The Acorn Project bond worth KSh 786 Million, issued on 31st July 2019, matures on 8th November, 2024.
According to CMA Quarterly Statistical Bulletin (QSB)-Issue 43/2020, for the period ended June 30th, 2020, the total outstanding amount for corporate bonds was KSh 27.93 billion.
This was a 17.68% decline from KSh 33.93 billion as of March 31, 2020, owing to the redemption of the Centum Bond Senior Unsecured Fixed Rate and Equity Linked note in Q2 2020 worth KSh 6 Billion.
During Q2.2020, bond market turnover decreased by 13.11% in the secondary bonds market, with KSh 136.65 Billion worth of bonds traded compared to KSh 157.26 Billion traded in Q1. 2020.
A further comparison of Q2.2020 bond turnover with Q2.2019 indicates a 32.19% decrease from KSh 201.53 Billion recorded in Q2.2019 to KSh 136.65 Billion recorded in Q2.2020.
