NCBA Set to Pay its Ksh 7 Billion Bond Before Maturity
Kevin Namunwa  |  Aug 12, 2020

NCBA Bank is set to save Ksh 222.5 million by redeeming its Ksh 7 billion corporate bond 91 days ahead of its maturity date.

The firm said it will settle the debt on September 14 and not December 14 which would be the bond’s maturity date. The bond was issued on December 22, 2014, by CBA Group which later merged with NIC Group to create NCA Group.

The merged entity inherited the liabilities of the two former banks.

With a fixed coupon of 12.75% payable semi-annually, the debt will have an accrued interest of Ksh 222.5 million by the early redemption date.

The bank has saved the money by canceling the obligations with its early payment.

NCBA’s managing director said that the lender currently has plenty of liquidity hence the decision to pay the bond from its internal cash flows.

“The early bond redemption will reduce interest expenses and is one of the optimal uses of capital at this time when lending has become riskier with the outbreak of the Covid-19 pandemic,” Gachora said as quoted by Business Daily.

Bondholders on record as of August 12 will be paid their principal together with the accrued interest on the new maturity date.

Ever since the merge happened, NCBA’s conservatism has increased as witnessed by its move to settle its date ahead of time. The Nairobi Securities Exchange-listed firm had earlier declared a final dividend of Sh1.5 per share for the year ended December 2019 but later canceled the proposed payout citing the risks posed by the pandemic.

The cancellation of the proposed payout saw the lender save Ksh 2.2 billion. To preserve capital while offering shareholders an opportunity to raise cash through selling stock on the NSE, the bank is capitalizing Sh748.8 million to issue bonus shares at a rate of one for every 10 held.

NCBA has managed to settle its bond ahead of its maturity date. Chase Bank and Real People defaulted on their Sh4.8 billion and Sh2.6 billion bonds respectively.