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BizDay Zimbabwe

ABCH plans +$200m debut euro bond

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ABC Holdings will soon issue a €150 million euro bond equivalent to $206 million, banking on the profile of its new partners Atlas Mara to enable it to attract investment.  Chief executive Mr Doug Munatsi said the group had long since prepared for the bond but because of the absence of an international credit rating for the group, it was going to be difficult to attract strong appetite.

“However, we believe once the transaction is completed we can start the placement. In fact the appetite for the instrument is very strong.”
Part of the proceeds from the bond will also be used to support the local bank lending activities and give an indirect boost to the economy.

The key part in raising capital anywhere in the world is on the ownership structure and Atlas Mara will be catalyst in opening the doors for ABC to start accessing the euro bond market. Raising money on the euro bond market will be a first for the country.

Market analysts believe that with a strong shareholder profile with Bob Diamond having a proven track record in frontier markets, ABC will easily raise the capital at good rates.

“Before they did not have a shareholder of reference; it was either Doug or Africa Development Corporation (ADC). This was going to make a bond issue difficult. The coming on board of Atlas Mara increases the prospects of a successful bond issue. No one wants to invest in a group with weak shareholder profiles,” said Mr Jerome Negonde, a market analyst.

Atlas Mara itself successfully raised $325 million in its initial public offering, which was advised by Citigroup. ABC has already identified a reputable international advisory company. Countries which have successfully had placements on the euro bond market include South Africa, Angola, Rwanda, Zambia, Gabon, Nigeria and Ghana. Euro bonds tend to have favourable yields. Euro bonds have also given African countries an opportunity to integrate into global financial markets.

Speaking at the annual results presentation last week, Mr Munatsi said the group would raise tier I capital of $100 million and increase minimum capital in each subsidiary to between $50 million and $100 million by 2015. The group will also arrange credit lines of $200 million to $300 million.

Meanwhile, Finance Minister Patrick Chinamasa said the transaction is a positive development for the economy as he “has been shouting hoarse over the need for investment in the financial services sector”.

“This private sector initiative, led by ABCH and Atlas Mara, will enhance our efforts to alleviate the tight liquidity conditions that have been prevailing in at least two ways. Firstly through $40 million payment to local shareholders of the bank.

“Secondly through additional capital injection of $40 million into the Zimbabwe operation this will create a stronger well capitalised bank that will empower our people, help reclaim the country’s industrial capacity, create employment, and of course also improve the tax receipts by Zimra!”
Minister Chinamasa added that this should send a signal that investors are welcome in the country. “We can sit down and talk if there are any challenges.”

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