Liaison Group will list the Sh44.79 billion Talanta Sports City Stadium backed infrastructure bond on the Nairobi Securities Exchange platform through a restricted offer in what will limit participation to wealthy investors able to make a minimum purchase of Sh5 million.
The debut asset backed security will be listed on the NSE’s restricted fixed income market sub-segment which is reserved for high-net-worth individuals who are assumed to have an understanding of sophisticated financial instruments such as the bond.
Linzi FinCo 003, a special purpose vehicle established to fund the 60,000-seater stadium, is in the market to raise the full amount of the notes in a single tranche. The notes have a 15-year tenor maturing in 2040.
“To fund the project, the issuer plans to raise up to Sh44.79 billion through a restricted public offer, with the notes listed on the Nairobi Securities Exchange’s Restricted Fixed Income Market Sub-Segment,” reads a report by South African rating agency GCR Ratings.
Trading at the restricted segment locks out retail investors who may not be able to analyse the risk carried by such instruments and are also less able to absorb potential risks of such investments including defaults.
The minimum trading amount in the segment is set at Sh5 million.
Pension scheme Laptrust set a minimum investment of Sh5 million for its real estate investment trust listed in 2022. Acorn Student Accommodation Income Real Estate Investment Trust set a minimum of Sh14 million when it brought on board new investors in 2021.
The issuers behind Linzi FinCo 003 are yet to disclose the rate of return and the minimum investment for an investor to take part in the offer.
Linzi FinCo, the financing arm of Liaison Group, successfully listed a maiden Sh3 billion Sukuk bond on the NSE last year.
The upcoming asset-backed bond has received approval of the Capital Markets Authority (CMA) with insiders stating they are already in the market talking to potential investors.
The notes have been packaged as eligible movable property in accordance with the provisions of the Movable Property Security Act of 2017 thus transferrable either by way of security or an outright sale.
This means investors can use the bond as collateral for borrowing.
Principal and interest payments will be made semi-annually. The payments are fixed but are denominated in US Dollars which exposes investors who need to convert to local currency to exchange fluctuations.
Bondholders will be paid from the National Treasury disbursements made to the Sports, Arts and Social Development fund (SASDF) and not proceeds from the stadium. The fund received Sh6.9 billion in the current financial year and has been allocated Sh13.5 billion in the financial year starting July. The funds are, however, earmarked for different stadiums across the country.
The issuer has organised a standby letter of credit with KCB Bank in case of delayed disbursements from Treasury.
The government has opted to source for funds from the public in order to complete the stadium before the 2027 African Cup of Nations (Afcons) being hosted in the country. Talanta Sports City Stadium is one of the facilities expected to host the biennial continental tournament that Kenya is co-hosting with Uganda and Tanzania.
As at April the Stadium it was 37 percent done with the government having paid only five percent of the total construction cost.
The contractor, China Road and Bridge Corporation, had agreed to continue with the works using its own cash.
