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Afreximbank narrows Africa’s financing gap with $300m D.Receipt

Development of Africa’s economy has continued to be the focus of African Export- Import Bank (Afreximbank), following its efforts to mobilize funds for infrastructure development and sustainable business initiatives across the African continent.

To further expand the Africa’s growth initiative through better funding opportunities, the bank is inaugurating a $300 million equity offering, using Depositary Receipts backed by its Class “D” shares.

The African Export-Import Bank (Afreximbank) is the foremost pan-African multilateral financial institution devoted to financing and promoting intra- and extra-African trade.

The bank was established in October 1993 by African governments, African private and institutional investors, and non-African investors.

Meanwhile, as investors, not only in Africa, but across the continent look forward to have a stake into Afreximbank’s success story through enhanced returns on their investments leveraging on the Depository Receipt, as the $300m offer, will open Afreximbank’s shareholding to Nigerian Investors and other investors across the African continent and beyond.

Afreximbank said that Depositary Receipts issuance is aimed at enhancing its capitalization in order to significantly narrow the trade financing gap in Africa, currently estimated at $120 billion annually, and to meet its strategic objective of growing intra-African trade in all regions of the continent, including island economies.

The supranational trade finance bank, Afreximbank, an investment grade rated multilateral financial institution, through the $300m issuance of Depositary Receipts, is opening its shareholding to the investing public.

Afreximbank, Dr. Benedict Oramah, on Wednesday August 23rd, 2017, flagged off activities on the Depository receipt in Lagos, where he met stakeholders and held press conference with financial Journalists. He provided answers to questions relating to the offer and developmental initiatives of the bank.

The Daily Times of Nigeria, recalls that President, Afrexim bank, early August, in Mauritius, announced the Depository Receipt, a major innovation in Africa’s capital markets. The offer, using Depositary Receipts backed by its Class “D” shares, is being arranged by SBM Group, a leader in the financial sector in Mauritius.

The Depositary Receipts, whose listing has been approved on the Stock Exchange of Mauritius, subject to raising the funds by the end of September, mark the fruition of a unique initiative on which Afreximbank and SBM Group have worked in the last few months and represent a big first for Africa’s equity capital markets. This represents the first time a supranational bank is issuing Depositary Receipts through an African stock exchange.

According to Afreximbank, the Depositary Receipts issuance is aimed at enhancing its capitalization in order to significantly narrow the trade financing gap in Africa, currently estimated at $120 billion annually, and to meet its strategic objective of growing intra-African trade in all regions of the continent, including island economies.

Dr. Benedict Oramah, President of Afreximbank, stated that “Mauritius as a premier financial center in Africa, has a conducive regulatory framework for this innovative equity offering. On the other hand, SBM possesses the competencies, investor contacts, infrastructure and support capabilities for the issuance of the Depositary Receipts.”

The Depositary Receipts issuance represents an opportunity for Afreximbank to diversify its shareholder base by enabling investors in Africa and beyond, who have not yet invested in the Bank, to do so and to strengthen Africa’s premier trade finance institution, whose interventions in its various member countries have created acknowledged developmental impacts across the continent, he said.

In addition, the Depositary Receipts would enable Afreximbank to increase its permanent source of capital while giving investors a liquid instrument which will have strong portfolio diversification effects, added Dr. Oramah. Being a novel issuance in Africa, Afreximbank’s Depositary Receipts are expected to further deepen Africa’s equity capital markets, paving the way for similar issuances by other multilaterals.

Chairman of SBM Holdings Ltd, Kee Chong Li Kwong Wing, said, “It is a privilege for SBM to have been entrusted by Afreximbank to execute such an important transaction. The structuring and issuance of Depositary Receipts is an addition to the Group’s portfolio of services, a recognition of our competence and experience, and it reinforces the position of SBM Group and Mauritius as important financial players in the region. It is high time to see Global investors investing in Africa and tap into Africa’s huge potential.”

“This initiative is an innovation for the financial market,” said Mr. Li. “This African ‘Premier’ shall be a model to other countries and financial institutions. Together, Afreximbank and SBM Group are creating opportunities for the reinforcement of trade, investment and development across the African continent and the deepening of Africa’s capital markets.”

Afreximbank’s shareholders are a four-tier mix of public and private entities, with Class “A”, constituted of African states, African central banks and African public institutions; Class “B”, made up of African financial institutions and African private investors; Class “C”, with shares held by non-African investors, mostly international banks and export credit agencies; and Class “D”, under which fully paid shares can be held by any investor.

Daily Times recalls that the Afreximbank, in demonstration of its Africa’s economic growth initiatives, recently closed a record $632.9 million and Euro 499.6 million syndicated term loan facility and also lifted Gabonese economy with $200 million.

“With 70 per cent of the commitments coming from Asia and the Middle East, this facility greatly enhances our drive to diversify our liability book by geography,” said Denys Denya, Afreximbank’s Executive Vice President in charge of Finance, Administration and Banking Services.

Mr. Denya said that Afreximbank would use the funds to repay existing debt, but would also apply it to funding trade finance and to meeting general corporate purposes.

The facility, according to the bank, is structured as a dual-currency (Euro and US Dollar) and dual-tenor (two-year and three-year) syndicated facility, with about 80 per cent of the total amount falling into the three-year tranche, helping the Bank to lengthen its liability profile in the Eurocurrency loan funding space.

On the lift to Gabonese economy, Afreximbank‘s Director of Client Relations, Rene Awambeng, who revealed the support during the opening of a business forum organized by Afreximbank in Libreville recently, said that the amount included financing provided for the development of the Ngok Economic Zone, construction of a container port in Owendo and development of agricultural infrastructure for palm oil fields.

Awambeng said that Afreximbank was committed to providing financial and advisory services to support the structural transformation of Gabon’s economy; and that it was intensifying trade finance activities in the country to help counter the impact of the decline in commodity prices.

Afreximbank’s intervention plans included the promotion of local value addition in the agricultural and forestry sectors, increasing the country’s power production capacity to support industrial development, unlocking the mining industry’s potentials, accelerating the country’s digitisation drive, developing the tourism, transport and logistics infrastructure, and providing support to increase access to finance for small and medium enterprises, stated Awambeng.

Bonny Amadi

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