Archive for the 'Bonds' Category
March 10th, 2010 by Tom Minney
The Government of Botswana has ended its P5 billion (US$722 million) bond issuance programme with an oversubscribed auction by the Bank of Botswana (www.bankofbotswana.bw) last Friday, 5 March, according to a report in Mmegi newspaper (www.mmegi.bw). The fundraising programme started in 2008 and raises funds for Government investment in large development projects under the National Develolpment Plan (NDP 10).
The central bank auctions Government bonds and treasury bills every six months, in March and September, and the auctions are open to members of the public.
The auction was the first time to launch a new, longer-dated 15-year-bond, providing the much needed benchmark for long-term borrowings. This was reportedly under allotted, with only P195 million of the P700 million on offer being allotted, despite total bids received being P 824 million. This may indicate that the market was demanding a heavier yield than Government was willing to pay.
According to the news report, there was overall oversubscription. The 6-month treasury bill fully allotted at P800 million and oversubscribed by P400 million. The 2-year bond was fully allotted at P200 million against P301 million of total bids received, the 51/2 years was slightly under-allotted, with P192 million of the intended BWP200 million being allotted.
The paper quotes Olebile Makhupe, Head of Global Markets at Standard Chartered Bank: “We have recently observed a shift in the Botswana yield curve with long-term yields picking up, reflecting expectation of higher rates in the future. In addition, long-dated asset yields have in the past reflected excessive demand rather than appropriate pricing for risk or where investors expect rates to be in the future”, she said.
Makhupe added that this trend seems to be changing, as availability of long dated assets has improved in the past few years.
“However, more work can still be done to create a platform for investors to liquidate their bond holdings when they need cash, rather than having to wait for the investment to mature, allowing for what is called secondary market trading,” she said.
According to today’s market report of the Botswana Stock Exchange (www.bse.co.bw), 10 Government bonds and 22 corporate bonds are listed, but trading does not seem very active.
February 13th, 2010 by Tom Minney
The regional governors of the African Development Bank (www.afdb.org) have unanimously backed a bank proposal to increase the general capital. According to a communiqué issued at the end of the 12 February meeting: a “200% increase would allow the Bank to serve client countries and entities within them.”
The bank’s sixth capital increase had initially been scheduled for 2012, but had been brought forward after the bank stepped up its lending programmes to counter the effects of the financial crisis. This included establishing flexible and fast-disbursing facilities such as the US$1.5 billion Emergency Liquidity Facility and US$1 bln Trade Finance Lines of Credit.
The bank stresses that its capital situation remains strong but the capital raising, in the shape of paid-in capital ratio of 6% and payments spread out over an 8-year period starting in 2011, would maintain the Bank’s prudential ratios within their limits until 2018, provided “the impact of the financial crisis on the Bank’s operations subsides at the end of 2010”.
On 2 February the bank announced that it had successfully launched and priced a three-year US$ 1 bln global bond issue, its first for 2010. The bank has a borrowing programme of about US$ 5.5 bln for this year. The proceeds will help finance the growing portfolio of AfDB projects in Africa.
In line with the Bank’s top-notch AAA credit rating, the issue was priced at “mid-swaps less 2 bps”*. The issue was oversubscribed with the order book reaching about US$ 1.4 bln and the bank’s Treasurer, Pierre Van Peteghem says the oversubscription demonstrates the strong confidence the markets have in the African Development Bank and its development mandate
He ssays: “We have started our funding programme very positively this year and, since the issue was a resounding success, we are very pleased. The tight pricing achieved by AfDB, with a broad distribution both by geography and investor type, clearly demonstrates the high value that international investors place on our credit”.
All main investor types were represented. Central banks and other official institutions accounted for 68% of the issue, 17% went to fund managers, and 15% to banks. Some 39% went to the Americas, 48% to Asia, and 13% to Europe, Middle East and Africa region.
Hassatou N’Sele, Manager of Capital Markets and Financial operations indicated that “The success of this deal is a reflection of the well executed benchmarks we have brought into the market, and the intensive investor works we have embarked upon. We have seen very strong demand from central banks all over the word and attracted investors that had never participated in an AfDB benchmark before.” This bank held a first Dealer Event in London on 20 January and attended by approximately 50 representatives from more than 20 banks. Its purpose was to raise the Bank’s profile on the markets, and to inform the investment banking community of its funding strategy and strengthen relationship with their capital market teams.
The latest issue was lead managed by Daiwa Capital Markets, Deutsche Bank, Goldman Sachs International and UBS Investment Bank. The co-lead managers were BNP Paribas, Credit Suisse, HSBC, Mizuho and Standard Chartered, reflected the Bank’s increased borrowing activities on the capital markets.
The bank did four similar transactions in 2009.
The governors’ backing for a general capital increase was also based on ensuring that resources were available to deal with global warming, which has the potential to significantly affect Africa’s development prospects. African leaders had proposed that 50%of world funds for global warming should go to Africa, to be administered by AfDB through a board of trustees.
* To be honest, I have no idea what this means. If any readers have enlightening opinions, you are welcome to add it. The best that I can find on the Internet is that it relates to currency swap rates, but what that would mean in the AfDB context I am not sure.
January 23rd, 2010 by Tom Minney
The capital market in Rwanda took another step forward with the listing on 22 January of a new Rwf2.5 billion (US$4.4 mln) two-year Treasury bond on the Rwanda Over The Counter (ROTC) exchange. According to the issuer, the National Bank of Rwanda (BNR), the bond has a 9.5% coupon rate.
BNR’s publicist Mr. William Gatete was reported in East African Business Week (www.busiweek.com) as saying that bond was oversubscribed by Rwf1 bln ($1.7 mln).
The ROTC, regulated and run by the Rwanda Capital Markets Advisory Council (www.cmac.org.rw) has been in operation for nearly 2 years and has traded less than $0.9 mln worth of treasury bonds in 57 deals, according to the report. It adds that a Commercial Bank of Rwanda (BCR) bond has traded $1.1m worth in only three transactions since 2008.
One listed treasury bond recently expired and another is due to expire soon. After that the ROTC will two listed treasury bonds, a ten-year BCR bond worth Rwf5 bln ($8.8mln) and cross-listed shares of the Kenya Commercial Bank (KCB). The total value of bonds listed is now Rwf17.7 bln ($31.2 mln).
Mr. Pierre Celestin Rwabukumba, operations manager of CMAC, was reported as saying that, since 2008, the bond price has been fluctuating between Rwf98.5 ($0.17) and Rwf102.75 ($0.18).
November 11th, 2009 by Tom Minney
The first bond launched on the Automated Trading System (ATS) of the Nairobi Stock Exchange (NSE – www.nse.co.ke) on 9 November, when KenGen listed its KSh25 billion (US$336 million) bond. The firm had offered its investors the choice of trading on the automated system by immobilizing their holdings (holding them on the computer systems) or trading on the traditional market with paper holdings and 91% opted to have bond certificates immobilized in CDS accounts, according to local media.
The ATS links to the central depositories of the Central Bank of Kenya (CBK) and the Central Depository and Settlement Corporation (CDSC www.cdsckenya.com). It offers T+3 settlement (payment and transfer of ownership on the third day after trading), compared to T+7 on the manual market, and a much better flow of information.
On Monday, some market players told local press that there had been problems with trading, but the NSE said that the system was functioning well and the only difficulties had been with some pricing by the sponsoring broker Standard Investment Bank, and some clarification on schedule dates falling on a Saturday, according to local press reports.
NSE Chief Executive Officer Peter Mwangi was reported as saying: “From this day forward, all immobilized listed bonds, such as the KenGen bond will trade in an end-to-end automated capital acquisition platform, right from the placement of orders, to matching and finally settlement. This is basically what has been implemented.”
NSE First Vice Chairman Lutaf Kassam told Monday’s listing ceremony: “Automation is the key that will unlock the much needed capital required to stimulate this economy. Automation is really about ensuring easy flow of information so as to allow market players, investors and potential issuers to make informed decisions.” He thanked investors for their support in choosing to have their bonds traded electronically.
The KenGen bond is currently the only corporate bond that has been immobilized abnd listed on the ATS to date. The next step could be to trade treasury certificates (which make up 92% of the KSh385 bln – $5.2 billion – market) and Government bonds, which are on the CBK central depository and so already linked to the ATS. Other corporate bonds can join but those already in issue and traded on the manual market would have to ask their bondholders to immobilize their certificates through an immobilization timetable approved by the Capital Markets Authority and CDSC.
The ATS is expected to offer more liquidity and attract more retail investors. It offers real-time data streaming from the transactions and more information on bond market mechanics. It guarantees T + 3 settlement for corporate bonds and T + 0 for government bonds and this will help liquidity. Bond Traders Association chairman Fred Mweni is reported as saying the ATS could boost annual trade volumes to KSh1 trillion from this year’s projected trade volume of about KSh200 bln.
On the first day of trade, a deal worth Sh77 mln was reported. The bond had initially aimed to raise KSh15 bln but offered an additional KSH 10 bln through a “green shoe” option after applicants offered KSh26.5 bln.
Based on reports from Nairobi SE, Business Daily and Capital FM.
October 12th, 2009 by Tom Minney
A bill to regulate the capital markets and collective investment schemes was tabled in the Rwandan Parliament last week. According to New Times newspaper, Trade and Commerce Minister Monique Nsanzabaganwa introduced the bill on 7 October.
She said a law is necessary before local companies begin full scale trading on the Rwanda securities exchange. Only companies that have embraced minimum corporate governance standards shall be allowed to be listed for trading and the law would create more investor confidence.
Rwanda currently operates as an Over-The-Counter (unregulated) market and the only share listed for trading is Kenya Commercial Bank shares, dual-listed with Nairobi and Dar Es Salaam stock exchanges and the Uganda Securities Exchange. Bonds are traded on a Rwanda bond market. However, the government plans to sell shares in some state-owned companies through the future Rwanda Stock Exchange.
The bill also proposes a Capital Markets Authority to replace the current Capital Markets Advisory Council (www.cmac.org.rw), which was established in 2007 and, in turn, set up the market. The future CMA would regulate securities exchanges and collective investment schemes, including mutual funds, unit trusts and contractual savings schemes.
Rwanda is already a member of the East African Securities Regulatory Authority. It is seeking to join the International Organization for Securities Commissions (www.iosco.org).
October 11th, 2009 by Tom Minney
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.
October 6th, 2009 by Tom Minney
Bond issues are cropping up across Africa, and investor interest could be keen for selected issues, as seen by the US$1.5 billion orderbook for the African Development Bank global bond. New bonds include Kenya’s Kengen issue for more power generation which closed on 29 September, and bank issues in Nigeria and Uganda.
The Preferential Trade Area Bank, according to its website www.ptabank.org, has issued a Uganda Shs 40 billion bond (US$21 million) to be listed on the Uganda Securities Exchange (www.use.or.ug), after approval from the exchange and the Capital Markets Authority. The offer was to close on 2 October. The Bank will use the proceeds to finance project activities in Uganda requiring local currency.
Stanbic Bank is arranger and lead placing agent and African Alliance Uganda Limited is sponsoring broker and co-placing agent. The duration is medium term and the bond offers both a fixed and floating rate.
The PTA Bank is rated long-term BB- and short-term B by Fitch, while Global Credit Rating gave it A1 local currency short-term, AA local currency long-term and a BB long term rating.
The Bank has also issued bonds worth $25 mln in Kenya, listed on the Nairobi Stock Exchange. in 1999 The PTA Bank issued a 5-year UgShs15 bln local currency bond which was fully redeemed on its maturity in 2004. Bank President, Dr. Michael Gondwe, says: “We believe in deepening the stock markets of the countries that we operate in through issuance of such instruments.”
The Bank has financed $116 mln in trade and project activities in Uganda. In particular it has supported Uganda’s coffee and cotton exports, first through its Structured Pre-Shipment Financing Facility and later by directly financing exporters. Its authorized capital is $2 bln and subscribed capital is $1.18 bln, according to the bank’s website. Net interest income rose to $15.2 bln last year, up 20% on the previous year. Profits were $12.5 mln at the end of 2008, up 87% on the previous year’s $6.6 mln.
Nigeria’s United Bank for Africa Plc (http://www.ubaghana.com) aims to issue raise N500 billion ($3.4 bln) in tranches through a combination of bonds with a 7-year duration and ordinary shares, according to its website. The bank was scheduled to hold an Extraordinary General Meeting of shareholders in Abuja on 2 October for their endorsement and had previously notified the Nigerian Stock Exchange.
Group Chief Finance Officer, Mr. Victor Osadolor, says proceeds will go into opportunistic acquisitions, funding infrastructure and the consolidation of the bank’s channel and IT infrastructure. The bank says it has over 7 mln customers across 750 branches in 19 African countries, as well as presence in New York, London and Paris.
October 6th, 2009 by Tom Minney
The African Development Bank on 30 September reported orders for over US$1.5 billion for its recent $1 bln benchmark global bond issue in the international market. According to the website, www.afdb.org, the 3-year bond, lead-managed by Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley, was priced at “mid swap flat” and carries a coupon of 1.75%.
“This transaction is a testimony of the confidence capital markets have towards the African Development Bank,” says AfDB Treasurer, Pierre Van Peteghem. “It is the fifth transaction by the Bank in 2009 and the third $1 bln global benchmark market completed in 2009.”
Investor participation was from all over the world, including Americas (57%), Middle-East (18%), Europe (16%) and Asia (9%). The “orderbook”, the list of those investing, was also satisfactory and was dominated by central banks and official institutions (52%) and fund managers (42%).
The AfDB’s borrowing program for 2009 was authorized for an amount of up to $9.8 bln, of which it has completed 61%. The global bond is the Bank’s ninth since 2002 in line with its strategy of maintaining presence and being “a rare but consistent issuer” according to the announcement.
September 24th, 2009 by Tom Minney
The African Development Bank Group (www.afdb.org) is urging the G-20 Summit to increase its resources. The bank says Africa and low income countries should not be left behind if the world economy shows signs of recovery.
Meanwhile the IFR Markets news service, quoted on Reuters newsagency, says AfDB, rated AAA by leading ratings agencies, plans a $1 billion 3-year global bond issue.
The “G-20” is a meeting of finance ministers and central bank governors from 19 developed countries, plus the European Union (EU), plus World Bank, International Monetary Fund and others. They are meeting in Pittsburgh, USA from 24-25 September. According to Wikipedia, they marshall 85% of the world economy, 80% of world trade, and 67% of the population.
AfDB President, Donald Kaberuka, said: “The economic crisis has been a major setback for Africa. The African Development Bank has played its role acting countercyclically. It has proved to be a reliable, responsive partner. Additional concrete steps for crisis mitigation and supporting recovery in low income countries are critical.”
He called for a general capital increase and replenishment of the soft loan African Development Fund (ADF). AfDB expects its investments in 2009 to double with commitments amounting to some US$11 bln, from US$5.8 bln in 2008, largely in response to the global financial crisis. Investments go to budget support, infrastructure, liquidity programs and trade finance.
AfDB announced its response to the crisis in March, including a US$1.5 bln emergency liquidity facility, a US$1 bln trade finance initiative, accelerated transfers of concessional resources to eligible countries, and more advisory support.
September 18th, 2009 by Tom Minney
Africa’s biggest exchange the JSE Ltd. – the Johannesburg Stock Exchange in South Africa – has seen increased revenues. The SA interest-rate market is set for dynamic new change after the JSE consolidated its merger with the Bond Exchange of South Africa (BESA). The exchange is adding new products, including derivatives, to give investors exposure to leading international shares and commodities.
JSE revenues depend on volumes of equities traded. According to a statement of the interim results to June 2009 (www.jse.co.za) released in August : “The volatile conditions in the first half of 2009, combined with increased foreign investment in South African equities, boosted trading volumes and therefore revenues. However, there was a significant fall in volumes of derivatives contracts traded (off a high base).”
The number of trades in spot equities soared by 31% to 9.96 mln (2008: 7.62 mln). Group revenue climbed 7% to R544.5 million ($72.9 mln) compared to the period to June 2008: R508.8 mln. Fixed costs remained controlled and this boosted profit before net financing income by 9% to R206.1 mln (June 2008: R188.8 mln).
Key development was the finalization of the merger of BESA under a “Scheme of Arrangement” and on 22 June the bond exchange became a 100%-owned subsidiary of the JSE. BESA’s market operations have been merged with the JSE’s existing Yield-X division to form a new interest-rate division, which runs the combined products. It is also developing a fresh interest-rate strategy for the South African fixed-income market and this will be finalized in consultation with market participants in due course.
BESA’s operating activities and personnel were integrated into the JSE. Former chair Nonkululeko Nyembezi-Heita joined the JSE Board, with Jonathan Berman, also a former non-executive BESA director, as her alternate.
The JSE added a new International Derivatives Market (IDX) as “an innovative series of derivatives on large foreign companies” which it says are “in response to client demand for rand-denominated exposure to well-known companies listed offshore”. According to JSE Chair Humphrey Borkum, writing recently in Business Report newspaper: “Essentially a market maker bank will buy the foreign share and write the South African investor a single stock future which will then trade on the JSE’s SAFEX trading platform. This enables South African investors, without exchange control restrictions, to trade and gain exposure to internationally listed shares such as BP, Vodafone, Smith Kline, Rio Tinto, Nokia and newcomers Warren Buffet’s Berkshire Hathaway and Bank of America.
There are now 29 of these international companies available on IDX none of which are listed on the JSE. I notice that in the latest Fortune 500 listing of the world’s largest corporations BP is at number four and Berkshire Hathaway at 41.”
In January, the exchange launched the cash-settled Chicago Corn futures contract under licence from the Chicago Board of Trade (CBOT) Group. This month (September 2009) it plans to launch rand-denominated contracts in platinum, gold and oil under licence from CBOT.
The announcement further says the JSE “encouraged institutions to reduce risks by bringing exposure to derivatives on-exchange, using Can-Do instruments”. It also “bedded down the new derivatives trading and clearing systems implemented late last year” while nearly doubling the number of currency derivatives contracts traded (on the previous period).
In February, the JSE launched its Africa Board, designed to attract dual listings of leading companies listed on African exchanges “as part of the JSE’s strategy to promote the growth of African capital markets’. It listed Trustco Ltd from the Namibian Stock Exchange as its first counter.
Borkum also advised investors that Exchange Traded Funds (ETF’s) are a value for money investment which advisers often do not promote, due to lack of commission. There are 26 ETFs listed including SA equities, international equities, dividend, bond, property, commodity and currency ETF’s An ETF is an investment product which tracks the performance of a basket, known as an “index” of shares, bonds or commodities but is not actively managed – it just represents the price changes of the index securities.
In the results announcement, Borkum and JSE CEO Russell Loubser state: “The JSE will continue to focus on increasing liquidity and improving market competitiveness. In the equity derivatives market, the exchange will work with clients who previously traded off-exchange but who now want to trade on-exchange to manage risk.
“Moreover, new products planned for the second half in cash and derivatives markets should provide trading volume in the medium term. The JSE remains committed to delivering value to issuers and investors.”