African bonds roundup

Absa Capital (www.absacapital.com), the investment banking arm of Absa Group, plans to work in a range of African debt markets, particularly in countries where its parent, Barclays, is active. Standard Bank has so far been the leader into Africa. The new Chief Executive, Stephen van Coller, who took over from John Vitalo from 1 October, was reported as having told Reuters the group would hope to increase revenues by up to 50%-60% over the next 3 years through more African business.

Van Coller is reported as saying: “We’ve seen debt capital markets starting to open up in Botswana, Kenya, Tanzania and Nigeria. There’s actually been quite a lot of interest because the yields are quite good and I think people are seeing emerging markets as handling the recession better.” He said there is growing foreign demand for emerging market sovereign debt, particularly in Nigeria, Ghana, Kenya and Tanzania. Botswana has strong demand for debt and other products but analysts say more products are needed on the market before there can be enough liquidity.

Kenya’s Safaricom mobile phone company (www.safaricom.co.ke) on 7 October announced a KSh 5 billion (US$67 mln) bond, pegged to Central Bank of Kenya rates. It is the first tranche of a KSh 12 bln programme approved by the Capital Markets Authority (CMA). The offer, aimed at institutional clients, closes on 29 October.

Safaricom Chief Executive Officer Michael Joseph is reported by local media as saying: “The conditions and pricing are right and we are confident the market will endorse our overall strategy by taking it up. Safaricom will be using the funding for general corporate capital purposes, including the rollout of some critical projects.” He said it would increase capacity, build a better network and expand to other areas that are yet to be accessed especially the north eastern part of the country.

Arrangers are Barclays Bank of Kenya (with Absa Capital), CFC Stanbic Bank and CFC Stanbic Financial Services. The joint sponsoring stockbrokers are CFC Stanbic Financial Services and Kestrel Capital (East Africa) Limited. The five year bond has a fixed component offering 12.25%, compared to 9.50% on the 5-year treasury bond, and a floating component offering 1.85 percentage points above the 182-day treasury bill, according to Business Daily (www.businessdailyafrica.com). The minimum subscription is KSh1 million. In 2008, Safaricom’s Initial Public Offer attracted 866,000 applicants, and the minimum share uptake was KSh10,000.

Nampower (www.nampower.com.na), the Namibian Government-owned electricity provider, plans to issue a ZAR 250m bond in November 2009 to raise capital in order to help it bridge the looming gap to supply enough power for growing demand. The company is reported as planning to boost cash reserves and strengthen its generation capacity and transmission network so as to avoid power supply disruptions next year. IN March 2009 ratings agency Fitch gave Nampower a BBB- long-term foreign currency rating and national long-term A- rating as monopoly provider.

Nampower already has a bond (NMP20) listed on the NSX, with a coupon of 9.35% and maturity in 2020.

Power shortages are becoming common in the southern end of Africa, and Namibia faces difficulties to buy sustainable imports from South Africa. However it is building an interconnector through the NorthEast Caprivi Strip to import an agreed 150MW from Zimbabwe, and agreements are also signed with ZESCO of Zambia (100MW), Mozambique (40MW) and it is in discussion with Democratic Republic of Congo’s SNEL to import 50MW. The Southern African Power Pool has led to strategic planning and connections.

In Uganda, the PTA Bank has extended the deadline to 12 October for its UgSh 40 billion ($21 million) bond issue, apparently to meet demand. Kenya Electricity Generating Company (Kengen) is reported on Reuters to have said it has received applications worth over KSh 25.2 bln for its KSh15 bln 10-year bond. However, it has regulatory approval to absorb an extra KSh 10 bln, in what is known as a “greenshoe” option. Earlier Kengen said it had enough projects to use the extra funds.

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