Archive for the 'Bonds' Category
April 24th, 2012 by Tom Minney
A new securities exchange in Lusaka (Zambia) is installing tried-and-tested bond and derivative trading software and says it will be ready to launch operations next month, May 2012. BaDEx has trading platforms that include spot and derivative trading in bonds, currency, commodities (such as derivatives on metals and silo certificates on the spot market) and a variety of other derivatives including agricultural commodities, precious metals, equity and energy.
There is also a central scrip depository system (CSD) with a separate core management, risk solution, surveillance and settlement systems and platforms. The CSD will apparently link to CSDs in South Africa, Europe and the US and with the central Bank of Zambia’s real-time gross settlement system.
BaDEx, also known as Bond and Derivatives Exchange, reports that it was licensed by Zambia’s Securities and Exchange Commission on 1 January 2012 and the licence covers all securities under the Securities Act – bonds, equity, derivatives and commodities. It has signed a contract effective 12 March with South Africa’s STT (www.sttsoftware.co.za, which has also provided the JSE’s bond trading software for many years), for STT to immediately deploy trading, clearing, settlement and surveillance systems, and systems for auctioning government securities that will be suitable for the central bank, among others.
Dominic Kabanje, CEO of BaDEx, told AfricanCapitalMarketsNews that the exchange is a public-liability company owned by “banks, pension funds and private companies including the major securities dealers in Zambia”. He says they started with 6 local stockbroking members (approach stockbrokers Madison Asset, Integral Initiatives, Intermarket Securities, Laurence Paul Investment Services, Pangaea Renaissance, African Alliance Securities for more information) but are also looking for remote members, working with a South African merchant bank.
Mr Kabanje said they are now doing primary listings. BaDEx will start secondary trading using an online, Internet-based platform when the systems go live and are also seeking to partner with an international clearing house. In a press release he said they had been excited for 18 months: “We are glad to have finally concluded and signed the contract with our software systems vendors. STT applications have been tried and tested in the South African financial markets at the Johannesburg Stock Exchange (JSE), who have used this software for the past 18 years.
“We are currently setting up a network of domestic and foreign-based settlement banks, local and remote foreign members and dealers, institutional underwriters, a clearing house as well as primary panels of domestic, regional and international investors. We plan to link up all willing domestic and regional banks, institutional investors, pension funds, treasury departments, the local central bank, the government debt management office and the local member brokers to our system by providing interfaces and online access to our platforms.
“We will also shortly join the international community of CSDs in South Africa, Europe and the United States initially to facilitate faster and smoother clearing of international securities transactions. The applications from STT and others will enable us to do this and in addition will allow us to compete internationally for bond and derivatives business”.
“I do not see any obstacles from the Zambian side for companies wishing to list. Even SA companies can list on BaDEx. We want Zambian companies to dual list on JSE and BaDEx. At BaDEx we are implementing SADC protocols on the free-trade area as well as enhancing intra-regional trade. An exchange is one such conduit for regional trade. We will, however, have to deal with the problem of exchange controls in SA.”
Michelle Janke, STT’s Managing Director, said the company was happy to reach further into SADC: “We have worked closely with the executives of BaDEx for more than a year, and the closely formed relationship will stand us in good stead over the coming months whilst we deliver all the software applications and prepare the new securities market in Zambia to go live. We hope that in due course through an ongoing cooperation between BaDEx and regional merchant banks we can assist in transforming Lusaka into a key financial hub within the SADC region. We will be there to make this happen operationally.”
Products to be traded include: corporate bonds, municipal bonds, currency futures and options, interest-rate derivatives (including swaps), equity derivatives and commodity derivatives on underlying copper, cobalt, gold, oil, wheat, soya and maize spot markets, bond derivatives market, spot bond market, spot and currency derivatives market, commodities derivatives (including metals) and the commodities spot markets (with silo certificates), agricultural derivatives market, spot equity and equity derivatives markets, precious metals derivatives market and energy derivatives market.
November 16th, 2011 by Tom Minney
2012 could be an active year for African bonds and particularly eurobonds, judging by the 5.5 times oversubscription for the “Namibia 21″, the country’s debut $500 million, 10-year Eurobond. According to a recent story on Reuters, Florian von Hartig, head of debt capital markets at Standard Bank which was one of the lead arrangers,said it demonstrated the appetite for liquid African paper. He added that 2012 was likely to be active if the markets bear up: “I think Namibia is just another sign of how much African credits are in demand. The economy in Africa has been doing very well at times when the so-called developed world (has experienced) zero growth or even recession. Naturally, investors want to get exposure to an area where growth is steady so it ticks all the boxes.”
Zambia is among countries also considering a 10-year $500m Eurobond. Reuters quotes Stuart Culverhouse, chief economist at London-based broker Exotix as saying finding the best moment in turbulent markets will be key: “The external environment is driving a lot of considerations at the moment and therefore finding a window of opportunity in the market so the issuer can get the best possible terms will be a crucial factor.” He added that Zambia’s strong fundamentals, including increasing copper production, single-digit inflation and relatively low debt, made it an attractive issuer. “I think the underlying strengths are there to elicit investor interest, but the new government has to build on that and consolidate on that rather than reverse direction,” he said.
Kevin Daly, emerging market debt portfolio manager at Aberdeen Asset Management, which bought the Namibian Eurobond, said it depends on the terms of the issue: “There’s enough African names in the market to use as a pricing reference. When you look at current yields on Senegal 10-year bond it’s around 8.3/8.4%, so that’s a good starting point for them.”
Namibia’s Finance Minister Saara Kuugongelwa-Amadhila, said in an interview yesterday (15 Nov) on ABN digital; “We think that this does not only enable us to raise the funding that we need to finance our deficit, but it has enabled us also to realize the objective of providing a benchmark for future raising of funds by Namibia’s private sector, which is very important for the Namibian economy going forward.”
November 16th, 2011 by Tom Minney
The Namibian government issued a debut US$500 million, 10-year Eurobond on 27 October and got a price of 5.75%, taking advantage of a lull in the capital markets turmoil. It was oversubscribed five and a half times.
Namibia’s 144A/RegS benchmark sovereign bond (“Namibia 21”) carries a coupon of 5.5% and is rated Baa3 by Moody’s and BBB- by Fitch, according to a Standard Bank announcement. Standard Bank Group (www.standardbank.com) and Barclays Capital (www.barcap.com) served as joint book-runners.
Since the issue, “Namibia 21s” have outperformed other emerging market (EM) bonds as there were several would-be buyers in the October issue who did not get what they wanted and so they took advantage of price dips to buy. According to Standard Bank last week: “Having started at a spread of 175 bps (1.75 percentage points) over an interpolated SA curve, Nam 21s are now only 122 bps over. Although part of the narrowing is the poor SA performance, which we believe is probably not justified, we still believe the spread will narrow further. We are very constructive on Namibia’s long-term structural transformation into an oil producer. Meanwhile, GDP growth was a robust 5.6% year on year in Q1 2011, fostering something of an upward revision in full-year estimates.”
Speculation on oil finds may still be premature, although exploration interest has grown strongly in the last year, with many companies moving closer to drilling. However, big new uranium mines are expected to add to Namibia’s exports from 2014.
Marketing the Namibian bond began on 27 September 2011 with a 5-day international road show of 2 teams of senior officials. Namibia’s Minister of Finance, Sara Kuugongelwa-Amadhila, and the Governor of the Bank of Namibia, Ipumbu Shiimi, led the delegations on investor meetings in Los Angeles, San Francisco, Boston, New York, Zurich, Geneva, Frankfurt, Munich and London. The roadshow highlighted economic fundamentals, such as a low government-debt-to-GDP ratio of 17% (at 1 September 2011) and real GDP growth rates of 6.6% in 2010 and forecasted at 5.8% for 2011.
According to the bank: “However, global market uncertainty and volatility caused primarily by the Eurozone debt crisis prompted Namibia to postpone a transaction until market volatility subsided and a potential resolution to the Eurozone crisis became more apparent.” It moved fast as sentiment changed: “A global market rally in risk assets following the conclusion of the EU leaders’ summit on 26 October provided strong market support and enabled the joint book-runners to announce the debut transaction. The joint book-runners released price guidance to the market on the morning of Thursday 27 October of a reoffer yield of between 5.75% and 6.00%. Investor interest built quickly across Europe, Asia and the US over the course of the morning and early afternoon. The investor response allowed the joint book-runners to launch the transaction at the tight end of price guidance by mid-afternoon on Thursday with a reoffer yield of 5.75%.”
Over 160 leading US, European and Asian institutional investors were on the order book. Fund managers and asset managers were over 50% of orders and the biggest proporation of the investors. UK accounts represented roughly 40% of orders, US 25%, continental Europe 30% and Asia about 5%.
Namibia’s is only the sixth benchmark sovereign bond to come to market from Sub-Saharan Africa (excluding South Africa) in the past few years, says the bank. Gabon and Ghana were first to issue sub-Saharan Africa Eurobonds in late 2007, followed by Senegal in 2009 and Nigeria in early 2011. In May this year, Senegal issued its second sovereign bond, but broke new ground by successfully concluding a joint bond issue and exchange. Standard Bank Group also facilitated a $250m 7-year loan to the Tanzanian government in June 2011, raised through regional and international financiers.
Peter Baillargeon of Standard Bank Group’s Debt Capital Markets Africa desk in London commented: “African economies urgently need to address the gaps in their infrastructure, especially in the areas such as energy and transport. This is where long-term sovereign bonds can play an integral role. Our involvement with a number of sovereign transactions demonstrates Standard Bank’s capabilities to successfully facilitate complicated transactions of this nature.
“We are proving that we have the required expertise and capacity to help African sovereigns as well as corporate entities to raise debt in international capital markets.”
Carl Piccolo, Head of International Debt Syndicate at Standard Bank in London, said: “Namibia’s debut Eurobond has been well received by international investors. This transaction provides Namibia with a very broad international investor base consisting of a number of the leading emerging market investors and is expected to serve as a liquid market benchmark to support international funding requirements for the government as well as the corporate sector going forward.”
October 28th, 2011 by Tom Minney
The next step for Africa’s securities exchanges is critical for the continent’s development. There is a huge demand for capital to be put to productive use in what could be the world’s fastest-growing continent, with a dire need for fast growth to drive out poverty. There is also a tide of international risk capital, looking to fund that growth and share in the profits. Between the two are the capital markets, challenged to move fast to become liquid, transparent and effective.
Lots of these topics are on the agenda for The 15th Annual African Securities Exchange Association conference (www.aseaconference2011.ma) (in Marrakesh, Morocco), which looks to have an excellent agenda. Casablanca Stock Exchange is the host, the theme is “Africa, alive with opportunities!”
Top speakers include key opinion leaders such as Thomas Friedman, Mark Mobius and maybe Christine Lagarde of the IMF. Expect speeches from Sunil Benimadhu (Stock Exchange of Mauritius and chair of ASEA), Karim Hajji of the Casablanca bourse, leaders of African securities markets and top speakers from several world bourses including BM&F Bovespa, Istanbul, NASDAQ OMX and the London Stock Exchange, with India’s National Stock Exchange and NYSE Euronext to confirm. They will be joined by finance ministers, bankers, analysts, traders, investors and many more.
Topics on day 1 include
• “The financial crisis: Is there a pilot in the plane?” Top analysts, bankers and traders, possibly joined by a European Commissioner from the heart of the crisis
• The economic implications of the “Arab Spring” for the continent, featuring key Ministers who are rebuilding post-crisis countries, a strategist and others
• Capital markets and BRICS (see previous story on stock exchange link-ups) – hear from CEOs and Executive Directors of key BRICS stock exchanges and Emergent Asset Management
• Nursing Africa’s future IPOs: heads of top African stock exchanges from Mauritius to Morocco, via Ghana and maybe Nigeria, plus PAI Partners, a leading French private equity firm
• A new FTSE-ASEA African index.
Day 2 tackles
• Regulation for cross-border development: Regulators from Morocco and the central African stock exchange, plus long-term Africa bull stockbroker Jonathan Auerbach
• Cost-effective and scalable technology options for emerging markets exchanges – featuring Tony Weeresinghe of the LSE, Anne Ewing of NASDAQ and maybe Joseph Mecane of NYSE Euronext, 3 top suppliers of securities markets systems to the continent who hold many of the keys to the next stage of evolution.
• “What’s hot in Africa today?” with a host of top speakers from politics, consulting, banking, mining, economics and development finance covering energy, infrastructure, mining, industry, agribusiness and others.
OPINION: Please note the Day 2 morning topics address critical and urgent issues of how African stock exchanges can work across (colonial) borders to build liquid and effective markets, part of the grand process of African integration and building viable economies.
Expect participants from over 100 countries. The ASEA AGM and committee are on 11 Dec and the conference starts on 12 Dec. The official language is English with Arabic and French translations.
Unmissable! Book the conference here via the ASEA website (www.africansea.org).
Warning!! You may not want to come home. The conference is in Hotel Palmeraie Golf Palace & Spa. The conference website says: “As a backdrop, the majestic, silvery, sentry-like summits of the High Atlas stand out. At the foot of the mountain lies a beautiful city, built in red and surrounded by age-old palm trees. Monuments defying time form a string of pearls for her. An enticing labaryinth, created centuries ago, of old ramparts meanders along its slender “body”. In this fairy-tale decor, lies Marrakesh the legendary; Marrakesh the imperial, the pearl of the south, bathed by an invigorating sun all year round.”
September 30th, 2011 by Tom Minney
Ethiopia has raised Birr 7 billion ($408 million) of debt to finance the $4.8 bn Grand Ethiopian Renaissance Dam on the Blue Nile River and plans to issue more bonds. Communications Minister Bereket Simon said the country is not raising funds from foreigners in a bid to demonstrate its economic resurgence, according to an interview on Bloomberg yesterday (29 Sept).
The 5,250-megawatt dam, also called the “Millennium Dam”, is scheduled for completion in 2017 with the first 700 MW to be generated in 2015. It is on the Blue Nile, the main tributary of the Nile River, about 30 kilometres from the border with Sudan. According to the report, the dam wall is to be 145 meters high and 1.8 kilometres long and the lake will be 1,680 square kilometres (Lake Tana is 3,000-3,500 square kilometres according to Wikipedia), reportedly mostly uninhabited forest in the western Benishangul-Gumuz region.
Prime Minister Meles Zenawi launched the project and construction in April. Ethiopia is busy with many giant hydropower, wind and other generation projects to use its potential to generate 45,000 MW of hydropower, 10,000 MW of wind and at least 1,000 MW from geothermal sources. It is becoming a regional electricity exporter to counteract shortages in the nine East African Power Pool (www.eappool.org) countries, including Kenya, Djibouti, Sudan and Uganda, which are to be connected by a regional grid by 2016. The country started exports to Djibouti in May, a transmission line to Sudan may be completed by January and a feasibility study for a link to Kenya has been finished. Ethiopia is seeking to diversify the fast-growing economy, which used to rely on commodities such as coffee for most of its foreign currency.
Bloomberg quotes Bereket: “Building a dam on the Nile has been the dream of every Ethiopian. For millennia, we have been looking at the Nile as if it has been a curse that took our fertile soil and benefited others while Ethiopia was impoverished.” Bereket is heading a “public mobilization council” to raise funds for the project.
Egypt depends on the flow of the Nile for all of its water. Previous President Hosni Mubarak opposed infrastructure projects by upstream nations, citing old treaties established by the British which favoured Egypt. However, Ethiopia announced the dam soon after Mubarak was deposed in February and the new government has reportedly sought details of the technical and environmental studies on the effect of the dam on Egypt’s Nile water flow. Bereket told Bloomberg that Egyptian and Ethiopian officials have met twice and relations are improving.
Zemedeneh Negatu, managing partner for Ernst & Young LLP in Ethiopia, told Bloomberg: “The financial capacity to build the dam I don’t think should be in doubt at all. Over the next six years, Ethiopia can collect from taxes somewhere between Birr 450 and 500 billion.” He said the dam is “very critical” for Ethiopia to achieve its industrialization goals and for neighbouring states.
Donations of a month’s salary by civil servants have been converted into bonds to help boost the nation’s savings rate, currently 5.5% of gross domestic product, Bereket said. The opposition have criticized funding pressure on civil servants.
Public funding is unlikely to be maintained as it would be “too taxing,” so private companies have been encouraged to buy the debt, which offers a coupon of 5%. There are also plans for bonds to be offered to the Ethiopian diaspora with returns above the London Interbank Offered Rate, while sales to farmers are planned “early next year,” he said. A “significant” portion of funding will also come from the government’s development budget, Bereket said. A National Bank of Ethiopia directive was issued in April compelling banks to buy government bonds equivalent to 27% of their loans each month may raise Birr 11 bn for development programs in its first year, according to Access Capital (www.accesscapitalsc.com), the Addis Ababa-based research group. That amount is likely to increase in subsequent years, it said in an April research note.
The Ethiopian Government plans to borrow Birr 398.4 bn by mid- 2015 to invest in industry and infrastructure. The World Bank said in June this may lead to the economy over-heating and debt problems, the. Annual inflation in Ethiopia was 40.6% in August, partly because the central bank boosted money supply.
August 17th, 2011 by Tom Minney
South Africa’s JSE Ltd stock exchange (www.jse.co.za) reported a 22% increase in net profit after tax to R253.8 million (US$35.8 m) for the six months to June 2011. This is driven by a 7% increase in revenue combined with controlled operating costs and the group declared a special dividend of 210c/share.
CEO Russell Loubser said in a press release: “All divisions of the JSE reported an increase in revenue in the first half of 2011, with particularly strong performances from the cash equities, commodity derivatives and currency derivatives markets. This revenue growth, combined with lower operating expenses, indicates a better performance. We also retained the focus on our major strategies.”
The JSE says it offers investors “a truly first-world trading environment, with world-class technology, surveillance and settlement in an emerging market context. It is amongst the top 20 largest equities exchanges in terms of market capitalisation in the world.”
Sources of revenue
The JSE gets its revenue from different activities:
• Issuer services –This division handles company and debt listings and revenue climbed, 6% to R48.8 m (H1 2010: R45.8 m). In the first six months of 2011, 5 companies listed on the bourse, compared to 6 in the first half of 2010. Loubser said: “Though there is a listings pipeline, potential issuers remain hesitant about the current economic environment. This is in line with the experience of other World Federation of Exchanges members.” (www.world-exchanges.org).
• Equity market – The number of trades climbed 5% and value traded increased 4% pushing total equities revenue up 8% to R371.7 m (H1 2010: R344.5 m).
• Equity derivatives market – Revenue rose 5% to R55.9 m (H1 2010: R53.3 m) as a 4% dip in the number of contracts traded was countered by a 12% rise in value traded. Loubser said: “This year, the equities derivatives team has worked hard to encourage trading of single-stock futures on the central order book, which we believe is key in unlocking larger volumes and attracting international players. There was also strong growth in index derivatives and bespoke products traded on-exchange.”
• Currency derivatives market – Revenue climbed 44% to R7.2 m, attributed to a change in the billing model to stimulate trade, a wider range of instruments traded and the introduction of bespoke, on-market products. Currency derivatives are a small but growing portion of group revenue.
• Commodity derivatives – revenue grew by 15% to R23.6 m (H1 2010: R20.6 m) largely due to increased trade. Loubser explained: “Local maize and wheat contracts continue to make up most of the trade in this market, but the trade of foreign-referenced instruments under licence from the CME Group continues to rise.”
• Interest rate market - Strong secondary trade figures resulted in a 16% revenue growth to R19 m (H1 2010: R16.4 m).
• Information product sales – Data sales to existing clients contracted, both locally and internationally, but revenue grew 4% to R61.1 m as the team continues to grow its base of international clients.
The special dividend is to be paid because the exchange has sufficient cash reserves for its current needs. It sets aside cash to fund operations, guarantee central order book equities trades, maintain infrastructure and meet capital needs for expansion. Loubser said: “Testing of the new equities back office system is progressing well and the new system is set to be implemented in 2012. As the capital expenditure for this project comes to an end.. the Directors have declared a special dividend of 210 cents per share”. The dividend will be paid out on 12 September.
In the last six months, the JSE has:
• Completed the integration of the interest-rate market trading platforms so that there is now a single platform for trading.
• Delivered the first phase of the remote disaster recovery site
• Made good progress in implementing the new state-of-the-art data centre which is scheduled to be completed before year end.
August 9th, 2011 by Tom Minney
Nigerian regulator, the Securities & Exchange Commission, is travelling the country to build education and awareness. Internationally it also is working hard to restore confidence in the capital markets, as regulation tightens since 2009.
SEC Director General Arunma Oteh, SEC Commissioners and senior officials visited Port Harcourt, capital of Rivers State, for 4 days of meetings with stakeholder groups such as business, civil servants, legislators, teachers and students.
Oteh challenged Nigeria’s state governments and corporates to seek long-term funds from the market to finance development projects, rather than using short-term financing. Short-term funds for long-term projects, she warned, would amount to a mismatch, with negative consequences and high default risk if, for instance, interest rates continued to rise.
Oteh said that no nation can develop without long-term capital and this was the “reason why governments make concerted effort to promote the market and ensure its stability as an integral part of the financial sector development.”
The SEC organized a 3-day investor/issuer education programme, themed: “The role of the capital market in mobilising funds for business expansion and infrastructure development.” Senior officials from the Nigerian Stock Exchange were present too, to encourage more companies to become listed on the NSE.
The SEC has also launched a partnership with Nigeria’s film industry (“Nollywood”), on using film to spread the word widely about capital markets and investing. According to a report of the SEC campaign in Daily Independent newspaper, the first fruit of the partnership was “Breeze,” a comedy/drama, which according to Kunle Afolayan, the producer/director, premiered on 19 July and teaches the essence of saving for the future.
Oteh explained the partnership with Nollywood was a good way to reach all strata of the Nigerian society. The SEC said “the capital market is key to transforming our society, because no nation has grown without its people saving to educate their children and to transform the country.”
She also said that the SEC is poised for more collaborations with Nollywood in the light of lack of share knowledge, significantly growing number of investors from only 4.5 million or 3% of the population (compared with 60% of U.S. households that invest in the capital market).
Collective investment schemes (CIS) are also on the rise. Oteh said there was an opportunity to pool funds for investment in infrastructure and the SME sector. Olumide Oyetan, CEO of Stanbic IBTC Asset Management Limited, was reported as saying CIS are not much used in Africa, unlike in the US where only 10% of individuals invest directly, and the majority through mutual funds and this is partly because of “poor awareness and low financial literacy amongst retail investors (less than 100,000 people use CIS in Nigeria); limited options available amongst operators and asset classes; aggressive return expectations from investors; safety of investment concerns since the global crisis; prevalence of unregistered and unregulated quacks.”
The Rivers State government is hoping to issue a N100 billion bond targeted at replacing the decaying infrastructure, helping to diversify from oil and preparing for the challenges ahead as first tranche of a N250 bn state issuance programme.
July 7th, 2011 by Tom Minney
Kenyan private equity firm TransCentury (www.transcentury.co.ke) is to list through introduction at the Nairobi Stock Exchange on 14 July at a price of KES50 (USD0.58) a share. The firm began as an investment club and is valued at KES13.35 billion ($148.7 million). The listing price is based on the closing price on 3 June when it stopped trading on the Over-The-Counter market operated by Dyer & Blair. The aim of the NSE listing is to widen the share register and clear the way for future capital raising.
Listing by introduction means that no new shares are issued and was previously used by Equity Bank in 2006. Transcentury will list on the NSE’s Alternative Investment Market Segment (AIMS), which requires that a company must have at least 100 shareholders, with more than a fifth of the shares in the hands of investors who are not employees or relatives of the principal shareholders. To be listed on the main board, Transcentury would need at least 1,000 shareholders, net assets of KES 100m and paid-up share capital of KES 50m. TransCentury does not have 1,000 shareholders but could move to the main board if it increases its shareholding.
Transcentury started in 1997 as a small business club run by an elite group of 20 well-connected leading businessmen. It used the OTC market to widen to 430 share owners who have agreed to list 418 million shares, of which 151m will be reserved for buyers of a convertible bond on sale in Mauritius. Another 182m shares are in reserve.
Gachao Kiuna, TransCentury chief executive, was reported in Business Daily newspaper saying the listing provides a broader base of investors with an opportunity to participate “in significant growth potential” and offers TransCentury the opportunity to raise capital more easily in the future. He said the company is not in a hurry to raise more capital: “We have a bond programme in place that will serve us in the medium term. After about 24 months we might need to look at other ways of raising funds.”
Transcentury founders will be able to sell up to 50% of their shareholdings but must keep the rest for 2 years, in terms of rulings by Kenya’s Capital Markets Authority. According to the newspaper, 13 shareholders have more than 3% each, amounting to 190m shares or 71% of Transcentury. The largest single owner is the estate of the late James Gachui with an 8.37% stake worth KES1.12bn. Kenya Revenue Authority’s Commissioner General, Michael Waweru, has a 7.96% per cent stake worth KES Sh1.06bn, followed by businessman Peter Kanyango with a 7.17% stake worth KES957m, Dyer and Blair chairman Jimnah Mbaru and TransCentury’s chairman Zeph Mbugua with stakes worth KEs830m each.
Transcentury has taken the interesting approach of raising low-cost financing through a $75m 6% convertible Eurobond, issued by Mauritian subsidiary TC Mauritius Holdings Limited which has already issued $35m. The company plans to list the Eurobond on the Mauritian stock exchange.
Private equity investment portfolio
According to its website, Trancentury invests in:
• Power Infrastructure: Manufacture of Electrical Cables, Conductors, Transformers and Switchgear
• Transport Infrastructure: Operation of the Kenya-Uganda Railway Concession
• Specialised Engineering: Distribution of Mission-Critical Industrial Equipment and Construction of Electrical Installations
“The philosophy is to pursue markets that display underpenetration and inefficiency”. Africa suffers a chronic under supply of power and transportation, and even when these services are available, the costs are multiples of comparable services in developed markets.
TransCentury owns stakes in cable factories which include East African Cables in Kenya and Tanzania, Cableries du Congo in DR Congo and Kweberg Cables in South Africa, which manufacture wires and transmission cables under its power infrastructure division. The company recently acquired 80% of Pende Electrical, based in the copper-belt region of Zambia, through its Tanzania subsidiary Tanelec Ltd. It is busy in energy in 5 countries.
The Information Memorandum indicates that TransCentury intends to invest KES 2.2bn raised through the bonds “in the KES 23bn capital expenditure programme to revitalize Rift Valley Railways and unlock the significant value of the railway.” Shareholders in the Kenya-Uganda railway are contributing additional funds to shore up the company’s capital base to repair the railway and buy new locomotives. The project had been held up by rows with Egypt’s Citadel Capital.
The remaining KES 3.87bn raised will be invested in other mega projects. The Information Memorandum states: “This will allow TCL to pursue additional investment opportunities in the power and transport infrastructure as well as in specialized engineering that meet our expected rate of return of 25%.” These could include a 100MW geothermal power station in Menengai for which the company has submitted an expression of interest and for which the value of the investment could be KES 8.1bn. South Sudan is another area with promise and the company would hope to benefit if the Kenyan Government privatizes key stakes in major industries.
“Our plan is to invest in infrastructure across the region with focus on mines, engineering and transport,” said Dr Kiuna.
The company doubled net profit to KES 468m in 2010 compared to 2009, while revenue grew by 25% to KES 7bn. It increased its dividend 4-fold, from 5 cents to 20 cents. Earnings per share were KES 1.29, showing a conservative dividend policy and the company boasted compound annual growth in profit after tax of 52.9% between 2003 and 2010.
July 6th, 2011 by Tom Minney
The dynamic Stock Exchange of Mauritius (www.stockexchangeofmauritius.com) is pushing ahead with a wide range of activities aimed at building its role as a secure base for international funding transactions and an African alternative to international listing venues. It is moving to becoming a multi-product exchange aimed at the international market, through rapid development from its origins as an exchange focused only on the domestic market.
According to the website: “In the years to come, the split of listings on SEM is expected to overwhelmingly consist of international funds, international issuers, specialized debt instruments, Africa-focused Exchange-traded funds and other structured products. As SEM also aspires to emerge as a capital-raising platform for Africa-focused investments routed through the Global Business Sector, the SEM platform will growingly (sic) be used to channel investment flows from SA/Europe/Asia into Africa and from USA/Europe into Asia.” Mauritius combines good regulation with flexibility and has been a key base for funds including private equity funds investing into Africa and into India.
The bourse is aiming for a wide range and growing numbers of issuers, players and investors, increasing the breadth and depth of the Mauritius market and integrating the Mauritius financial services sector within the international financial system.
It made major changes to the Listing Rules (early 2010) to align them with the government’s Collective Investment Schemes Regulations 2008, positioning SEM as an attractive venue for listing Global and Specialised Funds, in line with the strategic shifts. The Listing Rules are more flexible to reflect the specific attributes and characteristics of the specialised funds to be listed. SEM aims to be platform of choice for listing a wide variety of funds such as Specialised Collective Investment Schemes, Professional Collective Schemes Export Funds, Global Schemes as part of diversifying product offerings and emerging as an international exchange. The management also commits to aggressive timing in processing listing applications and a competitive listing fee structure. In May 2011, SEM introduced Chapter 18 in the SEM’s Listing Rules, to cater for the listing of specialist companies and specialist debt instruments, targeted at qualified investors.
It is one of the African leaders in multi-currency trading and (since 2010) can trade and settle equity and debt products in Euro and GBP. From June 2011 it was the first exchange in Africa to list, trade and settle equity products in USD.
It supplies real time data through top global vendors such as Thompson Reuters, Financial Times and Bloomberg (since early 2010). The data coverage by global vendors is a powerful marketing medium to enhance SEM’s visibility internationally and put the exchange on the radar screen of a wider spectrum of international investors, thus attracting more foreign investor interest on our market. Mauritius is one of the few African exchanges to be connected to Bloomberg and Thompson Reuters real-time. Growing interest from international investors has prompted index and data providers including Standard & Poors, Morgan Stanley, Dow Jones and FTSE to include SEM in new indexes recently launched to track the evolution of key frontier emerging markets.
Over the last 10 years, the Mauritius Bourse has attracted strong foreign investor interest, generating positive investment inflows into many listed companies. 2010 was a record year for net foreign investment inflows. “For 2011, we are already stepping up our efforts via international conferences and roadshows, to place the SEM on the radar screen of institutional investors who are keen on frontier emerging markets that are well regulated and adhere to international best practice”, says the website.
SEM also has ambitions to contribute more broadly to the development of the Mauritian economy and to help grow capital market activities nationally and throughout Africa.
Highlights of recent history
SEM became a full member of the World Federation of Exchanges (WFE – www.world-exchanges.org) in November 2005. This is a high standard and shows that SEM is in the top rank in terms of stringent standards and market principles required to be accepted to this status by the WFE, which sets the standards for registered securities markets worldwide. The standards are recognized by industry, regulators and supervisorss. The WFE membership helps ensure that foreign investors play a growing role – “in a typical year, foreign investments represent 25–35% of trading activities on our market” according to the website.
The Development & Enterprise Market (DEM) was set up in 2006 This is the market for small and medium-sized enterprises (SME’s) and newly set-up companies with sound business plans and showing growth potential. Companies can use the advantages and facilities of an organised and regulated market to raise capital for growth, to improve liquidity in their shares, to obtain an objective market valuation and to enhance their corporate image.
Since March 2010, the SEM was designated by the Cayman Islands Monetary Authority (CIMA) as an “Approved Stock Exchange” by virtue of its membership of the WFE for the purposes of CIMA’s Mutual Funds Law, Banks and Trust Companies Law, Insurance Law, Companies Management Law and Securities Investment Business Law. This raises SEM’s profile as a well-structured and properly regulated exchange and enhances SEM’s position as an attractive listing venue for global and specialised funds.
From 31 January 2011, SEM has been designated by the United Kingdom tax authorities, Her Majesty’s Revenue and Customs (HMRC), as a “recognised Stock Exchange” under section 1005 (1) (b) Income Tax Act 2007. This means that securities admitted to trading and listed on the Official Market of the SEM will meet the HMRC interpretation of “listed” as set out in section 1005 (3) (a) and (3) (b) Income Tax Act 2007 and for Inheritance Tax purposes. This designation confers potential benefits such as permitting UK pension schemes to hold securities listed on the Official Market of SEM, giving companies and funds listed on SEM access to a larger market of sophisticated, well-capitalised investors. The designation reinforces SEM’s attractiveness as a listing venue for global funds and specialized products. Securities listed on the Official Market of the SEM may be held in tax advantaged Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs) by UK investors. Holders of debt securities satisfying the Eurobond exemption and listed on the Official Market of the SEM are exempted from withholding tax on distributions underlying these debt securities. Inheritance tax advantages may accrue to UK holders of securities listed on the Official Market of the SEM.
June 20th, 2011 by Tom Minney
Egypt is chasing its short-term domestic market to fund ballooning Government deficits, but seems to be preparing for a new Eurobond issue to replace $1 bn in 8.75% Eurobonds maturing in July, according to Bloomberg.
A week ago, Bloomberg reported that US President Barack Obama’s May guarantee on $1 billion of Egyptian debt could cut the country’s borrowing costs, helping the transition to democracy. Bloomberg surveyed 5 fund managers and says the median estimate is that the guarantee could cut yields on the five-year debt by 200 basis points (2 percentage points) or the equivalent of $100 mn.
Yield watchers follow the 10-year Eurobond, issued at 5.75% in April 2010 and listed on the Bourse de Luxembourg. The 2020 bond price climbed at the start of June after the Government unveiled a new capital gains tax and higher corporate tax, although the news hit share prices and its yield fell 15 basis points (0.15 percentage point) to 5.66% on 2 June, the lowest since 14 January. It had peaked at 7.07% on 31 January.
The IMF has also announced a $3 bn loan and other reported backing includes a plan for a $2.2 bn World Bank loan and $4 billion in economic and budgetary aid from Saudi Arabia.
Sergey Dergachev, who helps manage the equivalent of $8.5 bn in emerging-market debt at Union Investment Privatfonds in Frankfurt told Bloomberg: “The U.S. guarantee helps to get more interest from investors and calm investors’ nerves a little bit. But underlying credit risks for Egypt are nevertheless very high.”
Bloomberg reports that Egypt is rated Ba3 by Moody’s, 3 levels below investment grade after its second downgrade this year in March. A statement on 24 May says: “Egypt suffers from deep-seated political, socio-economic challenges. These include chronic high rate of unemployment, elevated inflation and widespread poverty.” Unemployment rose to 11.9% in the first quarter this year, from 8.9% the previous quarter. Food prices have risen about 20% this year, according to the Government’s statistics agency. Standard & Poor’s rates Egypt BB.
According to a recent report on Bloomberg, the T-Bill auction on 19 June the Ministry of Finance fell 11% short of raising the EGP 6.5 billion ($1.1 bn) targeted at an auction of treasury bills. It sold EGP 3bn in 3-month bills, the highest since 13 February, and EGP 2.8 bn from 9-month bills, less than the EGP3.5 bn target. Bloomberg reports the average yield on the three-month securities jumped 16 basis points, the most since an auction on 20 April to 11.761%. The yield on nine-month bills gained 4 basis points to 12.944%.