Telecom, tech and banking companies are leading corporate finance activity in Africa by issuing oversubscribed bonds that are attracting international investors.
Afreximbank’s successful $1.3 billion bond issue is important in reenergizing development and trade finance within Africa. The international coupon was oversubscribed, achieving a final order book of $4.5 billion, showing global investors’ growing appetite for the bank’s long-term paper. The dual tenor bond, with $600 million maturing in five years and another $700 million in 10 years, is Afreximbank’s largest financial transaction in international debt capital markets to date. “Record pricing in record time,” says Ibrahim Sagna, global head of Advisory and Capital Markets, describing the float as historic.
A key financier for the continent, Afreximbank is owned by African governments and finance institutions. Seeking to facilitate diversification of trade, it is a major player in the African Continental Free Trade Area. Fresh capital from the bond will enable the bank to continue funding development of intra-African trade says Denys Denya, an executive vice president responsible for treasury at Afreximbank.
Participating financial institutions included Afreximbank Advisory and Capital Markets as sole financial advisors and HSBC Bank as coordinator and joint lead manager/book runner. MUFG, Emirates NBD Bank, Commerzbank and Standard Chartered Bank also participated as joint lead managers and book runners.
“Western institutional investors are yield hungry,” and thus tempted by the “high coupon/risk premium” on African bonds, says Babajide Ewuoso, founder and CEO of Greenfield Advisors in Nigeria. Finance institutions such as Afreximbank and the African Development Bank are currently “lending to their shareholders,” which reduces the risk of defaults.
“The yield curve established eventually benefits other issuers in Africa, especially leading domestic corporates,” Ewuoso says. “Africa’s bond markets are attractive to both impact investors and those basically seeking higher risk-adjusted yield.”
This comes as more African companies such as Liquid Intelligent Technologies (formerly Liquid Telecom) and Ecobank are turning to international and local bond markets for funding. MTN Nigeria recently issued a $263 million locally denominated bond at a fixed rate in May. There was such immense demand for Absa’s bond issued in May (more than seven times oversubscribed) that the bank upped it from $400 million to $500 million. Telecom, tech and banking companies are leading corporate finance activity in Africa by issuing oversubscribed bonds that are attracting international investors.