Archive for the 'Bonds' Category
May 31st, 2011 by Tom Minney
The London Stock Exchange (www.londonstockexchange.com) has long been a global centre for capital, particularly where African investments are concerned. It is also the world centre for Eurobonds and several leading African equities are traded in London. There are several reasons to come to London, either through listing or cross-listing, including being closer to investors and sources of capital such as funds and investment trusts and also because investors may find it more attractive to invest in companies that are listed on a well-known and recognized stock exchange. A few international exchanges, including London, Toronto and Australia, are also known as centres for world mining equities and attract specialized listings..
The LSE’s Main Market lists 18 equities for trading that focus on Sub-Saharan Africa. These are mostly South African firms covering food, industrials and mining and the history began with AECI in 1937 and Tongaat-Hulett in 1939. The main board also includes Zimbabwe’s hotel group Meikles, Hwange Colliery and financial services firm NMBZ; Kenya’s Kakuzi food products and Zambian miner ZCCM. All listings after NMBZ (1997) were incorporated outside Africa, including Channel Islands Jersey and Guernsey, Bermuda and UK. The list doesn’t include the “London Five” – Anglo American, BHP Billiton, SAB Miller, Old Mutual and Investec –of giant firms who caused controversy when they moved from South Africa. Africa is now a small part of their operations.
AIM, the LSE’s international market for smaller, growing companies, was created in 1995 for businesses seeking growth capital, including early-stage and venture-capital, as well as more established companies. Sub-Saharan Africa scores only 55 among the 3,000 worldwide companies. The list is dominated by mining companies, many incorporated in UK, offering investors exposure to gold, diamonds, gemstones, uranium, platinum, coal, iron and other metals and minerals spread across Africa from South Africa to Liberia and Sierra Leone. Also on offer are financial services, farming and fishing, water, computer services, real estate, industrial machinery and alternative fuels. Most of the countries of operation are English-speaking, but others include Mozambique and Somalia.
May 16th, 2011 by Tom Minney
Nigeria’s Guaranty Trust Bank (www.gtbank.com) is coming to the market with a $500 million Eurobond, which could potentially roll out into a $2 billion offering, according to sources in the last few days. The bank is listed on the Nigerian and London Stock Exchanges.
According to a story on Reuters on 12 May the bank is about to launch the 5-year bond and the price could be set at 7.75%. The lead managers are to be JPMorgan and Morgan Stanley.
In January the Federal Government of Nigeria’s issued a $500 mn debut 10-year Eurobond at a yield of 7%, according to a previous Reuters story. The offer was apparently 2.5 times oversubscribed but the bond had been trading broadly flat at 6.9% ever since. It was not much shaken by the April elections, as it seems the market is betting on stability and growth going forwards and the price climbed to give a yield of 6.1% by last week.
Reuters reports that GT issued a $350 million bond in 2007 which matures in Jan 2012. The bond has a coupon of 8.5% and is yielding 4.8%.
A research note from Standard Bank also boosts the bonds. “We consider the new Notes due 2016 to be one of the best emerging market bank securities in our universe. GTB is one of the largest banks in Nigeria. It is well-capitalized and highly profitable operating in a market that is hugely underpenetrated. Liquidity is strong. Management is experienced and sophisticated and very importantly to us, experienced in successfully negotiating a banking crisis. During the 2009 Banking crisis in Nigeria, GTB was resilient and quite successfully underwent increased regulatory scrutiny.” The bank says the bonds are at a “significant spread” to the Government bond and compared to other emerging market financial institutions trade, they find the bonds “attractive” and add “with time and increased local participation, we would not be surprised to see the Notes trading inside of 7%.”
The bank was founded in 1990 and at the end of the last financial year was Nigeria’s fourth largest by assets, with market capitalization of $3 bn.
Broker Exotix has also praised its “diversified loan portfolio, conservative management and superior risk management” and says it has superior asset quality.
May 16th, 2011 by Tom Minney
Want to get an idea how the Senegal bond compares with the others? Exotix (www.exotix.co.uk) is one of the leaders when it comes to Emerging Markets bonds. In this table they give you the lowdown:
Size (US$m) Mdur Yield(mid) Moody’s S&P Fitch
Senegal B1 B+ NR
Regional
Gabon 8.2% 2017 879 5.2 5.344 NR BB‐ BB
Ghana 8.5% 2017 750 5.1 6.036 NR B B+
Nigeria 6.75% 2021 500 7.2 6.165 NR B+ BB
Non-regional
Sri Lanka 6.25% 2020 1000 7.2 6.16 B1 B+ B+
Vietnam 6.75% 2020 1000 6.7 6.015 B1 BB‐ B+
Lebanon 8.25% 2021 2092 7.2 6.253 B1 B B
Georgia 6.875% 2021 500 7.3 6.953 Ba3 B+ B+
Ukraine 7.95% 2021 1500 6.9 7.195 B2 B+ B
Dom Rep 7.5% 2021 750 6.7 6.752 B1 B B
Source: Bloomberg, Exotix. Close 4 May 2011.
May 13th, 2011 by Tom Minney
Senegal has successfully re-priced its yield curve by issuing a more liquid 10-year $500 million Eurobond carrying a coupon of 8.75%. The bond was priced at 97.57 when it was bid on 6 May, the equivalent of a yield of 9.125%. Standard Bank noted it represented a spread of 596 basis points over comparable US Treasuries.
Senegal is rated B+ by Standard & Poors and B1 by Moody’s.
Samir Gadio of Standard Bank Research says the bond attracted a lot of interest, with final demand reaching $2.4 billion. In trading after the issue the mid-price climbed to around 102.75 on 11 May, representing a yield of 8.3% and spread of 508 bps. He adds in an investor note; “further upside is probable as the bond is likely to be included in the EMBI index in late May”.
Stuart Culverhouse of broker Exotix also tips the bond as one to watch: “There are not many places to get 9% yields these days. But we also think it overstates Senegal’s credit risk. We think the offer gives intrinsic value. Moreover, with the new issue likely meeting eligibility criteria for index inclusion (e.g. in the EMBIG) we expect there would be additional technical support for the new bond.
“We think Senegal’s credit fundamentals compare favourably with other B+ rated sovereigns. We think the new bond will offer good value compared to similarly rated peers (eg Ghana and Nigeria) with 200bps-plus upside.”
The bond replaces a $200m 8.75% bond due in 2014 which will be entirely retired. Gadio says the transaction helped significantly reduce Senegal’s credit spread by nearly 100 bps, even as the country extended its yield curve. He says “political risks remain relatively limited ahead of the 2012 general elections”, especially as Senegal’s democratisation process was initiated in the mid-1970s.
Senegal is part of the West African Economic and Monetary Union grouping of 8 West Afrian states formed in 1994, and uses the CFA Franc (XOF) currency linked to the Euro. As a WAEMU country, Senegal cannot independently determine its monetary policy. Gadio says, the Banque Central des Etats de l’Afrique de l’Ouest (regional central bank www.bceao.int) has historically been conservative in its money supply objectives, ensuring a low core inflation and interest rate environment. “The two main economic constraints remain a large current account deficit and a relatively sizeable fiscal deficit, even as public debt is sustainable.”
May 6th, 2011 by Tom Minney
The Nairobi Stock Exchange (www.nse.co.ke) and FTSE International (www.ftse.com) are to create new FTSE/NSE share and bond indices. These could be marketed to international investors who monitor FTSE indices, create more revenues for the Kenyan bourse and encourage foreign portfolio investors, boosting liquidity.
According to a report in Business Daily newspaper (www.businessdailyafrica.com), Terrence Adembesa, Product Development Manager at the NSE, said: “We believe this partnership will lay the foundation for the creation of data products, exchange-traded funds (ETFs) and other index-based products and will further attract enhanced foreign investment in the local market.
The NSE recently announced it would introduce a local bond index, starting with treasury bonds.
According to the FTSE Group website, it works with partners and clients in 77 countries worldwide and calculates over 120,000 end-of-day and real-time indices covering more than 80 countries and all major asset classes such as equity, bond and alternative asset classes. It is an independent company jointly owned by The Financial Times and the London Stock Exchange.
The website explains: “FTSE indices are used extensively by a range of investors such as consultants, asset owners, fund managers, investment banks, stock exchanges and brokers. The indices are used for purposes of: investment analysis, performance measurement, asset allocation, portfolio hedging, and creation of index-tracking funds.
“Independent committees of senior fund managers, derivatives experts, actuaries and other experienced practitioners review and approve all changes to the indexes to ensure that they are made objectively and without bias.
FTSE has offices in London, Frankfurt, Hong Kong, Beijing, Shanghai, Madrid, Milan, Mumbai, Paris, New York, San Francisco, Sydney and Tokyo, FTSE Group.
The NSE said they were considering developing the bond index, an equity index, equity sectoral and finally shariah index series and they should be launched during the third quarter of 2011, helping diversify the NSE’s income and enhancing the value of its brand. Mr Adembesa commented: “The agreements have been firmed up within the technical teams for both FTSE and NSE and are awaiting board approvals.” Modalities on the equity and bond index constituents, weighting and calculation are still being worked out. The partnership could work towards developing an East African index series, while maintaining the NSE 20 share and NSE All Share indices.
The newspaper reports that the NSE made KSh35.8 million loss after tax for the year ended December 2009 (compared to a KSh59 mn profit in 2008). Total income was KSh184.5 mn (KSh328.4 m in 2008) of which 89% came from transaction levies, annual listing fees, initial listing fees and application and additional listing fees. Other income was advertising, data vending and sale of publications and merchandising items and this contributed 6% in 2009. According to law, the NSE earns 0.12% of the value of all equity transactions and 0.0035% on bond transactions at the bourse.
Kestrel Capital (www.kestrelcapital.com) executive director Andre DeSimone told the paper that having an international index would add confidence and acceptability among international investors: “Stock exchanges internationally not only make revenue from fees but they also from selling the information. It would also allow international investors to benchmark and compare the performance of other markets with the Kenyan market and exposes Kenya internationally.”
Mr Adembesa said that adopting FTSE’s global index methodology would attract enhanced international investment into the local market and NSE staff would be able to share and knowledge transfer through exposure to FTSE’s calculation systems and global distribution network.
May 1st, 2011 by Tom Minney
The new management of the Nigerian Stock Exchange (NSE) has taken full charge with effect from 29 April, after interim Administrator Emmanuel Ikhazoboh, appointed in August 2010 by the Securities and Exchange Commission (SEC), bowed out on 28 April.
Chief Executive Officer of the NSE, Mr. Oscar Onyema, had taken up office on 4 April, but the SEC had asked for a one-month transitional period. Onyema had been Senior Vice President and Chief Administrative Officer at the American Stock Exchange, according to a statement.
Adeolu Bajomo, the new Executive Director, Market Operations and Technology, is set to start on 3 May, from his previous job as Head of Replatforming Programmes for Africa and Indian Ocean region for Barclays Bank plc. He is to lead operational and technology transformation of the NSE as it repositions for growth and global leadership through effective exploitation of technology and efficient business and market operations processes.
Ikhazoboh told journalists in Lagos that stakeholders should support the new management headed by Oscar Onyema who is expected to constitute a new management team. Reporting on the 8 months of his administration, equity trading grew from N5 trillion (US$32.4 million) to N8.5 trln while bond and other instruments rose substantially from N6 trln to over N10 trln. He said his task had been to restructure the market which had been in crisis so that the SEC had intervened. His administration was able to bring back credibility and investors’ confidence to the market, enhance its overall attractiveness to both local and foreign investors and to fulfil its mandate of putting a new management in place.
SEC noted that after the transition period, Ikazoboh will continue as deputy to the Interim President of the NSE on the NSE Council.
April 26th, 2011 by Tom Minney
The East African Monetary Union is supposed to be effective from 2012. The New Vision newspaper reported that senior officials including central bank governors, capital markets authorities, insurance and pensions regulatory agencies and national statistics officials from the East African Community (www.eac.int) partner states are set to meet in the last week of April 2011 for a third negotiation round in Tanzania.
The second meeting of the EAC High Level Task Force to negotiate the East African Monetary Union (EAMU) Protocol was in Burundi for 5 days in Feb-Mar and the first in Tanzania in January.
Four working groups – macroeconomic, statistics, financial sector and payment and settlement systems- will discuss the draft protocol.
According to reports, the second meeting considered the structure of the proposed East African Community Monetary Union Protocol and also finalised and adopted a matrix of issues to be negotiated in the different areas through the 4 working groups. It considered draft terms of reference for EAC macroeconomic convergence criteria that will be part of the monetary union protocol. It also advised that the study to review the EAC macroeconomic convergence criteria needed to be undertaken urgently.
The East African monetary union is supposed to be effective by 2012 after the EAC common market protocol that was effected on July 1, 2010 and the customs union in 2005.
EAC Deputy Secretary General (Planning and Infrastructure) Alloys Mutabingwa said in February that the EAC Secretariat was building capacity for the negotiation process and had signed a US$16 million grant agreement with the World Bank to support the EAC Financial Sector Development and Regionalization, initially for 3 years but with an extension for 6 more years. The project covers 5 areas with a base component of capacity building including: i) financial inclusion and strengthening market participants; ii) harmonize financial laws and regulations against common standards; iii) mutual recognition of supervisors; iv) integration of financial market infrastructures; and v) development of a regional bond market.
April 11th, 2011 by Tom Minney
Fee income from investment banking in sub-Saharan Africa more than doubled to US$157 million during Q1 of 2011, compared to same period in 2010. Of this $80 mn (51%) was earned on merger and acquisition (M&A) activity, according to a leaflet and press release from Reuters Deals Intelligence.
Uganda attracted 51% of activity, followed by South Africa with 43%, and most of the action was into oil and gas, which China the biggest acquirer, accounting for 26% of the total, followed by South Africa and Luxembourg. Most of the action was in energy and power.
Busisa Jiya, Investment Client Specialists Manager MEA at Thomson Reuters, commented: “The momentum from 2010 has carried on into the first quarter of this year in Sub-Saharan Africa as deal flow remained strong with investors attracted to African assets. Big deals in energy and power helped to make the first quarter a buoyant one for the M&A and debt capital markets”.
A total of $1.9 billion was issued in equity markets in Q1, double the same period in 2010 of which the majority was convertible bonds with $1.4 bn issued, including the biggest issue, a $621.1 mn convertible bond offering from South-Africa based Steinhoff Finance Holding. Most of the equity (58%) was issued in South Africa, followed by Mauritius (29%) and Nigeria (10%)
Fees for investment banks in equity markets totaled $29 million, the strongest Q1 since 2007. There were no initial public offers (IPOs or share offers) during the period Jan-Mar.
Activity on the debt capital market in Sub-Saharan Africa rose 86% to $7.2 bn ($3.9 bn in Q1 2010). The top Sub-Saharan bond during Q1 was $1.7 bn issue by South Africa’s ESKOM Holdings. Investment banking fees from debt capital markets were the strongest Q1 on record at $42 mn.
Barclays Capital topped the rankings with $3.5 mn in fees for work in equity capital markets (ECM) and $13.9 million in debt capital markets for debt transactions totaling $1.7 bn in the first quarter. Investec topped the M&A fee ranking during the first quarter with US$26.4 million. Goldman Sachs topped the M&A ranking for “any Sub-Saharan involvement” with $3.9 bn, with Standard Chartered coming in second with $2.9 bn. BNP Paribas and Citi tied for first spot for Sub-Saharan equity capital markets underwriting during the first quarter of 2011, followed by Macquarie Group.
Thomson Reuters Deals Intelligence is part of Thomson Reuters Investment Banking division and brings up-to-the-minute market intelligence to clients and the financial media through a variety of research reports including Daily Deals Insight, weekly Investment Banking Scorecard, monthly Deals Snapshots and industry-leading quarterly reviews highlighting trends in M&A and Capital Markets.
March 31st, 2011 by Tom Minney
Rebel Republican Forces have made a swift advance through Cote d’Ivoire yesterday (30 March) taking the capital Yamassoukro and San Pedro, a key cocoa exporting report according to reports on Bloomberg and Reuters. They have been meeting very little resistance, as soldiers loyal to incumbent president Laurent Gbagbo have either joined them or retreated to Abidjan.
The RF have launched a military offensive to support the claim of Alessane Ouattara, who is internationally acknowledged to have won last November’s presidential election but was then blockaded in a hotel and protected by UN peacekeepers after Gbagbo refused to accept the result.
Meite Sindou, spokesman for Ouattara’s prime minister, Guillaume Soroare said the RF about 90 kilometres north of Abidjan, in a town called Adzope. Bloomberg this morning quotes an interview with Young-jin Choi, the head of the United Nations mission that the advance has been “much more rapid than expected,” and the troops are within “striking distance” of Abidjan.
Fighting in Abidjan, formerly a top West African commercial centre, has already been fierce and the final showdown could be violent. One million people are reported to have fled their homes. Gbagbo is calling the Young Patriots youth militia to boost his troops. Reuters reports: “The army called on Gbagbo’s often violent youth wing to enlist in the military. They have been fired up with anti-French, anti-foreigner and anti-U.N. propaganda, and on Wednesday, the army started openly handing out weapons to them. They have set up roadblocks all over town and have attacked U.N. staff and killed several West African immigrants and suspected Ouattara supporters, Human Rights Watch says.” Amnesty International on 29 March said armed forces from both sides had committed atrocities.
The international and African communities have not intervened militarily and many civilians have been killed – at least 470 deaths reported – and tens of thousands have fled to neighbouring countries. However, there have been many meetings to discuss the crisis and yesterday the UN Security Council voted to step up pressure on Gbagbo.
Bloomberg says the markets hope the 4-month political crisis may end soon. CI has a €2.3 Eurobond which is in default since missing interest payments on 1 February. On 30 March the bond rallied 7% to 42.688 cents on the dollar, according to data compiled by Bloomberg, breaking out of its range of 36-40 cents for recent weeks. Bloomberg adds that prices of cocoa for May delivery fell to $70 (2.3%) to $2,987 per metric ton by 5:20 p.m. in New York, their lowest in 10 weeks, on hopes that a quick victory could pave the way for a renewal of exports.
There is an international arms embargo in place and on 2 March the UN apologized to Belarus for wrongly saying it had supplied Gbagbo with an attack helicopter – the CI airforce used to have Russian Mi-24 attack/transport helicopters.
March 30th, 2011 by Tom Minney
Rebel advances in Cote d’Ivoire are boosting the price of the country’s €2.3 bn Eurobond, which are in default since 1 Feb, in London trading. According to Bloomberg today (30 Mar), the advance boosted the dollar-denominated bonds to their highest in at least 2 months on 29 March as they climbed 4.2% so their price was 39.875 % of face value last night. The yield fell 31 basis points to 8.6%, according to data compiled by Bloomberg.
The country seems to be moving back in civil war, and the Republican Forces, loyal to presidential contender Alessane Ouattara, have taken at least 5 towns this week and moved to within 240 kilometres of Abidjan. The RF stepped up their military campaign in the past month, mainly in the western cocoa- producing region, taking the towns of Duekoue, Guiglo and Daloa in the past few days, and the eastern town of Abengourou on 29 March.
Reuters reports that heavy fighting has flared in the northern Abidjan suburb of Abobo, under control of the Republican Forces. Forces loyal to Gbagbo were accused of shooting civilians again yesterday, adding to a toll in which 460 people are already reported to have been killed. Up to 1 million Ivorians have now fled fighting in Abidjan alone, according to the U.N. refugee agency and more across the country. At least 112,000 have crossed into Liberia to the west.
The problem stems from a stand-off after incumbent president Laurent Gbagbo refused to leave after a Constitutional Court ruling disallowed hundreds of thousands of votes, meanwhile using the military to blockade Ouattara in a hotel where he is protected by UN peacekeepers. Although ECOWAS and the African Union promised strong measures in December and January, they have been unable to muster support for a military intervention to remove Gbagbo and recently the RF started its advance. Last week there were renewed international calls for intervention, wondering what the difference is between Libya and Cote d’Ivoire. The previous civil war was brutal and yesterday Amnesty International already said “All parties to the conflict have committed serious human rights violations including unlawful killings and rape and sexual violence against women.”
Observers seem to hope that the Republican Forces can drive out Gbagbo in a quick campaign and this is the reason for the rising bond prices. The Eurobond was created after Cote d’Ivoire reneged on $3.5bn of “Brady bonds” in 2000. These were fixed-income securities created as part of a debt restructuring plan for developing countries and named after former U.S. Treasury Secretary Nicholas Brady. It issued Eurobonds in April 2010 as part of its debt restructuring at a yield of 10.181%. The default was declared after a 30-day grace period after the country was unable to pay a $29m coupon interest payment due on 31 December.
Cote d’Ivoire’s financial sector had been in chaos since January. The region’s central bank, BCEAO, shut its offices on 27 January in the commercial capital, Abidjan, after finance ministers of the West African Economic and Monetary Union (WAEMU) ordered it not to give Gbagbo access to national funds. Cocoa exports were also halted. Gbagbo ordered the nationalization of foreign banks which had closed during February.