The UGX 12.5 billion bond is opened for subscription until the 27th of May
The African Development Bank (AfDB)
has launched its second Uganda-shilling denominated bond on the
domestic capital market. The UGX 12.5 billion bond is opened for
subscription until the 27th of May. It is the latest issuance under the
UGX 125 billion Medium-Term Note (MTN) Programme originally established
in mid-2012. The MTN approach was adopted to allow the Bank to regularly
tap into the Ugandan capital market, issuing various tranches, rather
than standalone transactions thereby minimizing costs for its clients
and reducing the lead time necessary to access the market.
The
AfDB return to the Uganda market reflects local demand for additional
debt instruments and the need for local currency financing to push
infrastructure and other development projects. Pierre Van Peteghem, the
Bank Group Treasurer, heralds this issuance as just the beginning of his
department’s push to avail more local currency to private sector
clients. “The Bank has recently approved an additional five African
currencies including the Ghanaian Cedi and the Franc CFA for both West
and Central African zones as official lending currencies of the Bank.
This brings the total number of African currencies in which we can
on-lend to clients to ten. This will enable us to better respond to
client needs, particularly with respect to mitigating foreign exchange
risk posed by hard currency loans. We believe by directly issuing local
currency bonds, we also play a key role in developing the local capital
market.”
Arranged
by African Alliance and executed as a tap sale on the original UGX bond
issued in July 2012, this most recent note will be linked to the new
two-year bond that the Government of Uganda intends to launch on May 23,
but will re-price every two years at 85% of the weighted average yield
to maturity on the latest Ugandan government bond benchmark, noted
Olivier Eweck, Manager of African Currency Funding in the Treasury
Department of AfDB. Similarly to the first tranche, this issuance will
also be launched at sub-government levels. “We expect a high demand from
local and international investors, even higher than for last year’s
first tranche,” says Eweck. The first re-pricing exercise will take
place in August 2014.
The
AfDB plans to launch two new MTN local currency programmes in Nigeria
and Zambia in the coming months. Since its first African currency loan
in 1998, the Bank’s local currency loan portfolio totals the equivalent
to over USD 2.4 billion. The Bank is however keen to diversify its local
currency portfolio across all African regions beyond the South African
rand which now dominates the local currency loan book and is the
multilateral lender’s third largest lending currency. As part of the
Local Currency Initiative established in 2006, the AfDB has received
approvals to issue in the local capital markets of Tanzania, Ghana and
Kenya, among other countries and hopes to enter many of these markets in
the short to medium-term.
Distributed by the African Press Organization on behalf of the African Development Bank (AfDB).
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