Safaricom Issues a Fixed Rate Green Bond – KES 15 Billion
Safaricom is seeking to raise KES 15 billion on its first tranche of a KES 40Bn Medium Term Note programme where the listed telco is allowed to issue various forms of debt capital including green notes, social notes or sustainability notes. The issue is aimed at diversifying Safaricom’s funding sources, strengthen financial flexibility and support long-term investments towards becoming Africa’s purpose led technology Group.
The KES 15.00Bn green bond comes with a green shoe option to accept up to KES 5.00Bn in case of oversubscription at a pricing of 10.4% per annum paid semi-annually, on 11th June and 11th December till maturity, working days.
As per a broader strategy to promote green financing, interest accrued from the green note will be tax exempt just like an infrastructure bond issued by the National Government.
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Our view on Return Versus Market Returns
The offer’s return on investment is equivalent to a normal treasury bond of 12.00% with a with-holding of 15.0%. In relation to the last government issues, the market can offer better returns with a higher return, taking into consideration the discounts in the primary market.
Further, using a 10% with-holding tax, the green bond’s return could be equated to an 11.4% fixed normal fixed rate government bond. This still confirms of higher returns from government papers, should one enter through the primary auction.
