October 3, 2019 / 10:55 AM / a month ago

Kenya's first green bond issue raises 4.3 billion shillings

NAIROBI (Reuters) - Kenya’s first green bond has raised 4.3 billion shillings ($41.45 million) to build environmentally-friendly student accommodation, the issue’s lead arranger said on Thursday.

FILE PHOTO: A Kenya Commercial Bank (KCB) Mtaani agent counts Kenya shilling notes on a money counting machine as she serves a client inside in the banking hall at the Kencom branch in Nairobi, Kenya July 10, 2018. REUTERS/Thomas Mukoya

So-called green bonds are fixed income securities that raise capital for projects in renewable energy, energy efficiency, green transport and waste-water treatment.

The bond was issued by Nairobi-based property developer Acorn Holdings after new rules were unveiled in February to guide the issuance of green bonds.

Stanbic Bank, which arranged the deal, said the bond was priced at an interest rate of 12.25% and rated B1 Global, a notch above the Kenyan government’s rating of B2.

“The subscription book was well diversified with significant interest from Kenyan domestic pension funds, commercial banks, insurance and reinsurance companies and non-resident funds,” the bank said.

The issue was looking to raise a minimum of 2 billion shillings and a maximum of 5 billion shillings, Stanbic said.

It was structured as a “restricted public offer”, targeting sophisticated investors who received a 50% guarantee from credit guarantees provider Guarantco on both their investments and the interest. Over-the-counter trading will be allowed.

The advent of the green bonds will help protect Kenya from the impact of extreme weather on the agriculture sector, which contributes about a third of annual GDP, said Nuru Mugambi, a director at the Kenya Bankers Association.

“With the landmark legislation that zero-rates taxes on green bonds, we expect to see more issuance coming to market,” she said.

In January, HSBC said global green bond issuance is seen at $140-$180 billion this year, from $149.2 billion in 2018.

Editing by Timothy Heritage

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