The Capital Markets Authority (CMA) has granted approval to Centum Real Estate Limited (Centum Re) to issue secured zero-coupon and secured zero-coupon equity-linked Medium-Term Notes of Sh4 billion.
This is with a green shoe option of Sh2 billion.
The offer, a restricted issue, targets sophisticated investors who are sufficiently versed with the risks associated with the notes, in line with Section 30(b) of the Capital Markets Act.
A greenshoe option is an over-allotment option. In the context of an initial public offering (IPO), it is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than initially planned by the issuer if the demand for a security issue proves higher than expected.
The Centum Real Estate Limited notes have a tenor of three years.
Proceeds from the issue will be used to fund real estate development by Centum Re, a subsidiary of Centum Investment Company Limited.
The senior secured zero-coupon notes will attract an indicative interest rate of 12.5 per cent whereas the senior secured zero-coupon equity-linked notes will generate an indicative interest rate of 12 per cent.
The senior secured zero-coupon equity-linked notes comprise an additional 200 basis points over and above the interest rate, subject to the Issuer meeting a minimum project internal rate of return of 20 per cent on at least two of the projects financed by the Notes.
“Following review of the lender’s information memorandum, the Authority is satisfied that Centum Re Limited makes adequate disclosure of material information in accordance with the requirements of the Capital Markets Act,” CMA said Thursday.
The issuer has been assigned a short-term credit rating of A2 and a long-term rating of BBB+ from Global Credit Rating Company Limited, according to a statement on its short form prospectus.