Lead managers of the energy bond have described as positive, investor confidence expressed at the road shows conducted ahead of the bond issuance.
Government on Monday, October 23, 2017 concluded the two road shows for the energy bond to clear the 2.5 billion dollar energy sector debt.
The representatives of Fidelity Bank and Standard Chartered Bank; the lead managers for the bond, indicated that investor confidence both in London and Accra gives much optimism to the outcome of the bond issuance.
Commenting on the basis for their satisfaction, the Director of Treasury and Markets at Fidelity Bank, Sam Aidoo explained,“We had a roadshow in the UK where we met investors and had another one here in Accra on Monday [October 23, 2017]. If I have to measure the outcome of the road show as being one that investors fully understand the structures in detail and fully appreciate what we want to do I think we did fantastically well. You even find investors giving you numbers immediately after the road show.”
His counterpart, Xorse Godzi, Country Head of Global Banking at Standard Chartered Bank couldn’t agree more.
“We had a good participation from local investors and asset managers and that is a very good indication that there is a good level of issuance…it’s going to deepen the local markets of Ghana and it is going to be good for us.”
Citi Business News understands Monday’s meeting was well attended by members of the investor community.
These comprised bankers, private businesses, government representatives, pension fund as well as other asset managers.
Even though the processes have advanced to this stage, it is still unclear how the IMF wants government to treat this bond; whether a sovereign one or a corporate one.
Sources close to the deliberations have hinted to Citi Business News that a decision on this may be concluded this week.
Corporate bonds picking up in sub Saharan Africa
Studies have shown that corporate bonds issue in sub Saharan Africa have increased both in size and the number of countries with active markets; from zero percent of GDP in 1989 to over 1.3 percent of GDP in 2010.
Hence Ghana’s decision to issue a corporate bond falls in line with developments on the regional market.
The Energy bond has become apparent following the huge financial challenges that have bedeviled the banking sector due to accumulated debt from both state owed power institutions and Bulk Oil Distribution Companies (BDCs).
The debt is estimated at 2.5 billion dollars the equivalent of some 10 billion cedis.
But the first tranche of the energy bond is expected to raise 6 billion cedis or 1.3 billion dollars.
This decision, according to the managers is largely influenced by the available funds from the proceeds of the Energy Sector Levy Act (ESLA).
“If we get some time to check how much the levies accrue and realize that they have accrued enough to be able to issue a second tranche then of course we could go ahead with the other tranche.”
It is unclear how much interest government will be paying on the bond but Citi Business News understands it will fetch a rate slightly above the 18 percent on government’s latest 10 year bond.