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Africa Credit Markets Brief: June 16 – June 29

Africa Credit Markets Brief: June 16 – June 29

South African lawmakers rebuff watchdog on CB mandate shift – Sibanye Gold sells new dual tranche notes – Etisalat Nigeria woes deepen – Nigerian banks line up fresh bond transactions – UBA Kenya subsidiary plans to tap parent company bond – Ivory Coast sees strong auction results – Morocco delays local sukuk sale – Coral South project reaches financial close – new investment laws coming to Egypt – Angola readies commercial loan

 

Regional Themes

The African Development Bank (AfDB) approved a US$100mn loan to finance Export Trading Group’s (ETG) soft commodity value chain operations in sub-Saharan Africa last week. The SCFF is one of the core Trade Finance instruments in the Bank, structured to provide pre and post-shipment finance along various stages of ETG’s commodity value chain operations in 17 countries. This is supposed to help local farmers and soft commodity suppliers grow their revenues and produce crops for export.

African financial services firm Atlas Mara Ltd said it is raising US$200mn via a share and convertible bond offering with a strategic investor, in order to support its investment in Union Bank of Nigeria.

Pan-African telco Liquid Telecoms is readying a US$700mn bond to help refinance existing debt and fuel the company's expansion efforts. The funds will be raised via an SPV, Liquid Telecommunications Financing Ltd., the company said this week.

South Africa

The head of South Africa's anti-graft watchdog Busi Mkhwebane said at the weekend that she is open to further talks on her recommendation to shift the Central Bank's core mandate, which is enshrined in the country's constitution. Mkhwebane recommended that the South African Reserve Bank's core mandate of managing inflation and price stability should also include a focus on economic growth, something law makers and the Central Bank have criticised heavily over the past week. Some lawmakers have voiced concerns over the recommendation with a view that it will have an adverse impact on the country's image as an 'investor friendly' nation. In a related move, S&P Global warned South Africa earlier this week that its rating could be cut deeper into junk territory if the government meddles with the "critical" independence of the country's Central Bank

The Reserve Bank of South Africa has since filed a High Court challenge against a recommendation from the head of the country's anti-graft watchdog to change its mandate, saying it would undermine its role in keeping the financial system stable. Public Prosecutor Busi Mkhwebane recommended that the South African Reserve Bank's core mandate of managing inflation and price stability should also include a focus on economic growth, a controversial recommendation that appears to be gaining strong opposition among lawmakers. South African government bond spreads widened and the rand dropped slightly in the wake of the move.

Yields on bonds issued by South African miners spiked slightly last week after details of the country's new mining charter were revealed. Mines Minister Mosebenzi Zwane is giving miners 12 months to raise the minimum threshold for black ownership to 30%, up from 26%. The rule is widely expected to be challenged in the courts.

Myriad International Holdings (MIH B.V), a subsidiary of South African ecommerce company Naspers, is exploring the possibility of an international US dollar bond. Naspers, Africa's biggest listed company by market size, said its subsidiary would launch a roadshow to meet potential investors, but gave no timeframe.

Barclays Africa Group will need to repay ZAR1.1bn (US$86mn) to South Africa's, the country’s anti-graft watchdog announced.  According to the public protector the bank unduly benefited from apartheid-era bailouts from 1986 to 1995.

South Africa’s Sibanye Gold, sold a double-tranche bond worth US$1.05bn which was two times over-subscribed. The bonds and the rights issue are being used to partially settle a US$2.65bn bridging facility arranged to finance the $2.2bn takeover of Stillwater Mining, a US-based platinum group metals producer.

South Africa's Treasury is in talks with banks to roll over ZAR9bn (US$695mn) in debt due to be paid this month by struggling state airline South African Airways (SAA), according to multiple reports. SAA, which is reliant on government debt guarantees of almost ZAR20bn rand, has been cited as a threat to South Africa's economy by rating agencies that have recently downgraded the country's sovereign rating to "junk". If SAA fails to meet its debt obligations, it may have ripple effects on the government's wider guarantee framework, Treasury Director General Dondo Mogajane told legislators.

Nigeria

Even though the Central Bank of Nigeria (CBN) is yet to lift the ban on commercial lenders going for dollar denominated loans, some of the banks already started to negotiating bonds and other financial instruments based on foreign currency transactions. Three banks have, either partly or fully, finished moves aimed at securing foreign loan investment, including a US$500mn Eurobond by UBA. Among them are Zenith Bank, Diamond Bank, GTB and others.

Abu Dhabi's sovereign wealth fund Mubadala Development is said to be pulling gout of Etisalat Nigeria, casting a cloud over the company's recent loan renegotiation efforts, and may lead to the company's dissolution, according to local press reports. Nigeria's Premium Times reports that in order to continue running the company, the consortium of Nigerian lenders renegotiating the overdue loan could create a holding company to be approved by the country's telecommunications regulator, which would then resume operations. Etisalat Nigeria repaid US$500mn of US$1.2bn in loans owed to lenders before it defaulted in February due to a currency devaluation, a senior executive told Reuters.

Nigeria sold a five, 10- and 20-year bonds at a flat rate of 16.19% at an auction last week to curtail borrowing costs as inflation declines. The Debt Management Office (DMO) raised a total of NGN99.26bn, less than the NGN140bn it wanted to raise, as it did not want to pay more for the notes.

Nigeria plans to launch its first national social-welfare program modelled on Brazil’s Bolsa Familia with the purpose of boosting its ailing economy and reducing poverty by giving cash to its poorest citizens and ensuring their children go to school. The government of Africa’s largest economy is investing NGN500bn (US$1.5bn) in the initiative this year and is talking to the World Bank about a possible US$500mn loan.

Nigeria printed US$300mn in diaspora bonds maturing in 2022 with a 5.625% coupon. Bonds were sold at a price of 100% with an initial yield of 5.625%. Bank of America Merrill Lynch, First Bank of Nigeria, Standard Chartered Bank and United Bank for Africa manged the deal.

The Government of Nigeria announced it will receive a US$300mn World Bank loan facility to support National Housing Finance Programme (NHFP), its new housing scheme. The International Development Association (IDA) loan is a credit facility with 40 years repayment period.

The Central Bank of Nigeria (CBN) in collaboration with the Nigeria Communications Commission (NCC) intervened in the crisis between Etisalat and a consortium of thirteen Nigerian banks over a syndicated loan of about US$1.2bn in order to prevent job losses and asset stripping. Etisalat, an Abu Dhabi telecom company, has been instructed to transfer its 45% stake in Etisalat Nigeria to a loan trustee after debt restructuring talks with lenders failed. Etisalat Nigeria had been in talks with Nigerian banks to restructure the loan after missing repayments but those discussions failed to produce an agreement on restructuring the debt, the company said in a statement. 

Nigeria has secured US$961mn from the World Bank to support implementation of the country's flagship 4-year economic recovery and growth plan, the organisation announced. About US$611mn will go towards the country’s Better Education Service Delivery for All programme, which will help boost access to education among Nigeria's low-income rural population, and US$350mn for the Kaduna State Economic Transformation Programme for Results, which is aimed at helping drive private investment in the region.

Kenya

United Bank of Africa Kenya plans to tap into a recent US$500mn Eurobond issued by its Nigeria-based parent, the company announced. “We see our subsidiary taking advantage of this significant fundraising to support some of the large tickets we have in our pipeline,” the company's Managing Director Isaac Mwige said this week. The bond maturing 2022 was oversubscribed 2.4x.

Pan African, Ecobank Group, will seek to raise US$400mn in convertible bonds to boost the company’s capital position. According to the lender, the convertible bond issue will have a maturity of five years and a coupon of 6.46% above 3-month LIBOR.

The Kenyan National Treasury is doubling down on sustainable finance initiatives in a bid to help mitigate the effects of climate change on the country's economy, Dr Geoffrey Mwau, director general, budget fiscal and economic affairs, at the National Treasury told a green finance conference late last week. The Treasury is currently working on the country's debut sovereign green bond, which could be launched by the fourth quarter of this year.

Cote d`Ivoire

A Eurobond that Ivory Coast launched this month, initially set at US$1bn, raised US$1.25bn in 16-year debt and €625mn in 8-year paper, the country’s Prime Minister said last week. Prime Minister Amadou Gon Coulibaly said the "success of the operation bears witness to the confidence of international markets in the leadership of President Alassane Ouattara," according to a statement from his office.

The Japan International Cooperation Agency (JICA) has signed a JPY34.41bn (US$300mn) loan agreement with the African Development Bank under the EPSA initiative. The loan carries an interest rate of 0.35%, to be repaid in 40 years after a 10-year grace period, and is intended to promote economic growth and reduce poverty in Africa.

Morocco

Morocco has moved its planned local sukuk issue to September so it can be in coordination with other Islamic finance measures, Finance Minister Mohammed Boussaid said last week. The Minister did not comment further on the size of the sukuk. Islamic banks and insurers are setting up in the North African kingdom after it adopted legislation allowing them into the domestic market.

Morocco’s Centrale Populaire (BCP) has secured €100mn and €35mn from the IFC and Proparco, a subsidiary of Agence Française de Développement (AFD), for the bank's first green bond issuance. Proceeds from the issuance will be used to finance sustainable and environmentally friendly projects in the country.

Morocco's Central Bank is due to announce this week the date for the first phase of liberalising the dirham, an IMF-backed reform to strengthen the North African kingdom's economy, Reuters reported. Most experts anticipate the currency transition to be smooth, with foreign reserves looking solid, the dirham balanced and public finances improved by lower global oil prices that eased the cost of energy imports.

Mozambique

Italian gas major Eni along with four other partners - CNPC, ENH, GALP and KOGAS - finalised the financing package for Mozambique's Coral South project, which includes the first ever floating liquified natural gas (FLNG) project financing transaction valued at over US$5bn.  Bank of China, China Development Bank, the Export-Import Banks of China and Korea, Industrial and Commercial Bank of China, Korea Trade Insurance Corporate, the China Export & Credit Insurance Corporation (SINOSURE), and about 17 commercial lenders participated with the transaction.

Mozambique's smaller lenders should consolidate in a bid to stave off a full-blown banking crisis, according to a regional business risk specialist. Speaking to Bloomberg, Robert Besseling, a director at EXX Africa, a risk analysis consultancy, said rapid credit growth and excessive exposure to bad loans among the main challenges facing the country's economy. The country is under added pressure this week after reports suggested the government hid its dodgy debt deals with a number of state-owned companies for up to a year, casting a shadow over its dealings with the IMF and other concessional lenders - which halted loan disbursements in the wake of the revelations in 2016.

Credit Suisse this week rebuffed claims it secured over US$100mn in fees in exchange for troubled loans arranged for Mozambique's state-backed companies. The company said in a statement that it has secured US$23mn for arranging US$2bn in loans to tuna fishing company EMATUM, security firm Proindicus and Mozambique Asset Management (MAM). A forensic audit of the dodgy deal, which was unapproved by parliament and caused the IMF to halt critical funding to the nation, was released Saturday. Among other things, the audit determined that not enough had been done to explain how the US$2bn was spent, and highlighted concerns around discrepancies in the price of assets and services provided by Credit Suisse and VTB, the two lenders that arranged the loans.

Egypt

Average yields on Egypt's five-year and 10-year treasury bonds plunge at an auction on Monday, central bank data showed.  Average yields on the five-year bonds dipped to 18.349% from 18.475%, while the yield on the 10-year bond fell to 18.346% from 18.556%.

Egypt's investment ministry has submitted the draft of the investment law executive regulations to the cabinet, Reuters reported. Investment Minister Sahar Nasr told the news agency that said Egypt has received US$6.8bn in foreign direct investment in the first four months until May, and expects more than US$10bn in the next fiscal year starting in July.

Angola

Angola is currently teeing up commercial loans to help finance the development of an integrated infrastructure project in the city of Lubango. The project, which is expected to cost roughly US$212mn, includes a ring road, dredging of water lines, improvements in energy supply, water distribution network and construction works. The country has already secured part of the financing from the Angola Development Bank.

Cameroon

The IMF has approved a US$666mn 3-year credit facility for the nation of Cameroon to support the country's economic reform efforts, the lender said this week. "Having initially shown resilience owing to its greater diversification, the Cameroonian economy is now facing decelerating growth, declining fiscal and external buffers, and rapidly-rising public debt," the IMF said in prepared remarks. The Francophone West African region has struggled in the face of low oil and commodity prices and increasing security concerns as it seeks to contain Boko Haram militants along its border with Nigeria.

Namibia

The Development Bank of Namibia has received a 'BBB-' rating from Fitch in advance of a potential bond issuance in the second half of 2017, the company announced this week. The bank plans to issue between NAD250mn and NAD300mn is the market conditions are ripe. Namibia has in recent months benefitted from a slowdown in inflation, decreasing to 6.3% in May - down from 6.7% the same month in 2016.

Rwanda

The African Development Bank (AfDB) approved a line of credit of up to US$20mn to the Development Bank of Rwanda (BRD) to finance projects or enterprises in various transformational sectors including in agriculture, energy and manufacturing, affordable housing and energy financing sectors, and aims to accelerate broad-based and sustainable economic transformation and poverty alleviation in Rwanda.

Uganda

Uganda’s central bank lowered its key lending rate to 10.0% from 11.0%, citing that a stable exchange rate for the shilling and subdued domestic demand had contributed to an easing of core inflationary pressures.

Zimbabwe

Zimbabwe will attempt to clear up to US$1.7bn owed to various financial institutions, the World Bank's country director told Bloomberg this week. Zimbabwe's public-sector debt rose to US$11bn during fiscal year 2017, the Parliament Budget Office reported this week, a sign the country's economic fundamentals continue to erode. Domestic debt rose close to 40% to US$4.3bn, with external debt jumping to US$7.5bn. According to the PBO, about US$5.2bn of that debt is currently in arrears. The government has so far relied on a raft of new taxes and 'bond notes', an artificial currency pegged to the dollar, to help stave off a full blown economic crisis.

The government of Zimbabwe signed a US$478mn agreement with Sakunda Holdings, a local energy company and three banks to finance the 2017/18 summer farming season. The southern African nation has since 2001 relied on imports and foreign donors to meet demand for the staple maize. CBZ bank, Barclays and the local unit of Ecobank are set to provide the funds.

 

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