Student hostels developer Acorn Holdings is set to redeem the remaining balance of its Sh5.7 billion corporate bond a month early, the company announced on Friday.
The five-year medium-term note, issued in November 2019, was due to mature on November 8, 2024, but the outstanding balance of Sh2.69 billion will now be repaid on October 4, 2024.
The green bond, which is held by the company’s Acorn Student Accommodation (ASA) Development Reit, has been paying investors a fixed rate of 12.5 percent in annual interests and its proceeds have been drawn down over the period to finance construction of hostels in Chiromo, Hurlingham, Karen, Thika Road (USIU) and Madaraka.
“The notes will be redeemed at an amount equal to the nominal value of the notes, together with accrued but unpaid interest from the preceding interest payment date up to and including the early redemption date,” Acorn said in a notice.
“In connection with the early redemption, the notes will be delisted from the fixed income securities market segment of the Nairobi Securities Exchange (NSE).”
Acorn did not disclose in the notice the source of funds it is using to make the latest early repayment to bondholders. The company, however, usually utilises the proceeds of hostel disposals to its Investment Reit (I-Reit) to repay any debt incurred during the construction of the housing units.
Acorn normally funds projects with a mix of about 65 percent debt and 35 percent equity.
Earlier redemptions under the bond programme have been funded through the sale of hostels to the Investment Reit.
The I-Reit then generates income from rent and utilities, which is then distributed as dividends to Reit holders. The ASA I-Reit had a portfolio of seven hostels valued at Sh10.3 billion in the six months to June 2024.
In the same period, the ASA D-Reit held 11 properties at various stages of development with a total valuation of Sh10.9 billion. These include two hostels in Karen under the company’s Qwetu and Qejani brands, which it expects to offload to Acorn’s Investment Reit (I-Reit) by the end of the first quarter of 2025.
Acorn had earlier disclosed that it would not look to issue another corporate bond once the present paper is retired, partly due to prevailing high interest rate conditions and the fact that the company has secured long-term concessional funding from the US International Development Finance Corporation (DFC).
The DFC funding of $180 million is the seed facility of a $700 million, 18-year financing package from local and foreign lenders.
