EA firms seek to raise $4bn in borrowing spree before end of year

Saturday March 15 2014

Tanesco has secured a $255 million syndicated loan to boost its operations. Photo/FILE

Tanesco has secured a $255 million syndicated loan to boost its operations. Photo/FILE 

By PETERSON THIONG’O The EastAfrican

No less than 15 public and private companies in East Africa are planning to borrow over $4 billion before the year ends.

Data by a leading debt tracker highlights the growing demand for capital amid rising uncertainty over the cost of funds in the region.

Data from the latest Debtwire, a lending monitor, shows that a large number of government agencies and private companies are seeking funds from international and local markets.

A majority of them, the data shows, are keen on raising cash through the regional bond market. The firms are banking on bullish stockmarkets and stable interest rates to raise funds.

For example, Kenya Airways is seeking a $1.5 billion syndicated loan to finance acquisition of new planes while the Kenya Rural Roads Board is targeting to raise $500 million through a multi-currency infrastructure bond to fund road expansion.

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In Uganda, the Africa Alliance Uganda is said to be planning to raise $500 million to set up a regional property fund, while the Uganda Electricity Transmission Company wants to raise $370 million to finance a 150MW solar power plant.

The Tanzania Electric Supply Company Ltd has secured a $255 million syndicated loan and is only awaiting government approval before the money is disbursed.
In Rwanda, Fusion Investment hopes to secure a $20 million loan to finance real estate development in Kigali.

“Sovereign issuers, parastatals and private companies with ambitions of continental expansion remain hungry for capital but with uncertainty over costs of capital, African issuers are rethinking their borrowing strategies,” said Debtwire.

“The minerals and resources sector has had a tough time raising funds and now has to be creative in its financing structures and partners,” Debtwire added.

The growing demand for capital has catalysed borrowing plans across the continent with the Debtwire estimating that borrowing by African firms and bond issuing doubled last year.

African borrowers raised $69 billion in cross-border debt markets in 2013, up from $18 billion in 2012, while issuing $24.9 billion worth of bonds in 2013 compared with $13 billion in 2012.

African firms signed loans worth $44.1 billion in 2013. A number of other companies, which are not included in the summary by Debtwire are also planning  to raise cash.

Kenya’s Capital Markets Authority late last year granted I&M Bank Ltd approval to issue and list a medium-term note of Ksh10 billion ($117.6 million) on the fixed income securities market segment of the Nairobi Securities Exchange.

Uchumi Supermarkets and National Bank of Kenya plan to raise Ksh1.5 billion ($17.2 million) and Ksh10 billion ($114 million) respectively through rights issue thisyear. Diamond Trust Bank plans to raise Ksh2 billion ($22.9 million) in rights issue.

The Kenya Electricity Generating Company (KenGen) plans to open a Ksh15 billion ($176.4 million) rights issue by the end of this year, marking its first cash call since listing on the Nairobi bourse in 2006.

The state-owned power generator is seeking to raise cash to build new power plants that will grow its installed capacity to 3,000MW by 2018 from the current 1,239MW.

But whereas the cross-border and the corporate bond market expanded in 2013, the continent’s debt market is primarily concentrated in a few countries with South Africa, Nigeria and Kenya controlling over 80 per cent of the total bond listing in Africa.

Rwanda an eight-year corporate bond worth Rwf10 billion ($14.4 million) issued by I&M Bank (previously Commercial Bank of Rwanda) in 2010.

The regional governments don’t have longer dated securities that act as benchmarks for corporate borrowers. Kenya has only one 30-year bond, while in Rwanda and Uganda, the longest bonds are five and 10-year bonds respectively.

Last November, Tanzania issued its debut 15-year bond. Last month, Rwanda issued a $18.3 billion cross-border bond, the first in the region.

The three-year bond was oversubscribed by 40 per cent, the highest in the country’s history. But most importantly, institutional investors took a bigger slice of the bond.

Rwanda’s Finance and Economic Planning Minister Clever Gatete said 52.85 per cent were banks.

The bond attracted 46.16 per cent of institutional investors while 1.20 per cent were retail investors.

“We used to have a situation where almost the banking system used to buy almost 100 per cent of the bond ,” said Mr Gatete.

The local investors took the lion’s share with 94.26 per cent while regional investors accounted for 8.04 per cent.

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