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Bond Issuance Slumps to Six-year Low



  • Bond Issuance Slumps to Six-year Low

Sovereign bond issuance by African nations including Nigeria plunged to its lowest level since 2010 as buyers pushed up yields and proposed new borrowing plans.

Stripping out South Africa, sub-Saharan nations managed to get only one hard-currency bond last year, Financial Times reported.

Even that, a five-year $750m bond issued by Ghana in September, had to be scaled down from plans to borrow $1bn over 10 years amid buyers’ fears that the west African state would wrestle to meet its fiscal targets.

This compares poorly with the interval from 2013 to 2015, when sub-Saharan states (excluding South Africa) issued 21 greenback bonds, elevating a complete of $18bn, accordance to a report by Exotix Partners.

The Head of Analysis at Exotix, Stuart Culverhouse, said final year’s weak issuance was largely due to a weak exterior backdrop, with low commodity costs and tepid enthusiasm for rising markets among worldwide buyers.

This resulted in a “large dislocation in yields,” which surged past 12 per cent for African commodity exporters, earlier than falling again to round eight per cent later within the year.

“Loads of nations most likely couldn’t afford to difficulty. The solely nations that would most likely didn’t need to,” Culverhouse said.

The sub-Saharan Economist at Renaissance Capital, Yvonne Mhango, said one other issue behind the issuance drought was that many nations were trying to implement fiscal consolidation.

“If you’ve got nations which have been requested to rein of their spending then it implies that the necessity to increase additional funding falls,” Mhango said.

The Head of Rising Market Sovereign Analysis at BlueBay Asset Management, Graham Stock, said the shortage of an IMF programme triggered buyers to shun Zambia’s overtures, whereas oil producers, reminiscent of Angola, had been out of favour amid low international costs.

“We had various oil producers that may have issued final year however are nonetheless struggling to exhibit that they’ve their funds suitably adjusted to handle increased debt ranges,” Stock said.

He added, “Last year was uncommon in that there weren’t many governments that wanted difficulty and those that may have appreciated to have carried out so weren’t ready to accomplish that.”

He forecasts that a pick-up in issuance this year from the likes of Zambia (assuming it does enter an IMF programme), Kenya and oil producers reminiscent of Nigeria, Angola and Gabon, as their funds enhance in step with recovering crude costs.

“I believe the markets can most likely take in that,” he said.

Mhango also believes the country will attempt to borrow this year, given that it is among the comparatively few main nations within the area with an expansionary price range.

Kenya is one other chance, she said, adding that it could go for a syndicated mortgage as an alternative.

However, Mhango was sceptical that the funds of most commodity producers had improved sufficient to help issuance at a yield they’ll afford, given a backdrop of the rising United States rates of interest.

Culverhouse warned that the times when African nations might borrow at charges of five to six per cent, as Zambia, Nigeria, Kenya, Ivory Coast and Namibia all did between 2012 and 2015, “have most likely gone.”

However, Stock said that the truth that a wave of 10-year bonds issued in 2007 and 2008 at the moment were approaching maturity meant governments would probably be eager to refinance.

Moreover, the timing could also be propitious he said, adding that with nations reminiscent of Argentina, Colombia, the Dominican Republic, Turkey and the Philippines, sometimes rated triple or double-B, presently available in the market, Stock added, “The subsequent transfer may be to see extra issuance from the best yielders, reminiscent of these in Africa,” he said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Global Credit Rating Affirms Sovereign Trust Insurance A Rating




Global Credit Rating Affirms Sovereign Trust Insurance A Rating

Global Credit Rating, an international rating agency based in South Africa, has affirmed Sovereign Trust Insurance Plc A rating in its latest report released for the month of December 2020.

In a statement released through the Nigerian Stock Exchange (NSE), Global Credit Rating noted “that the Company has shown a great deal of consistency in her claims paying obligations to her numerous customers spread all over the country.

The Report further stated that “the listing of the Rights Issue in 2019 helped in increasing the Shareholders’ funds of the Company by 33.8%, to N7.8b by the end of the Financial year in 2019 as against the figure of N5.8b in 2018.

“Subsequently, by the third quarter of 2020, the Shareholders’ funds had increased to N8.2b which also translated to a 31% increase in the corresponding period of 2019 with a figure of N6.3b. In the Rating Agency’s opinion, Sovereign Trust Insurance Plc is strong in liquidity with more than adequate claims coverage that compares well to industry averages.

“The capital adequacy of the Underwriting Firm is considered strong according to the rating report and this is underpinned by the sizeable capital base catering for the quantum of insurance and market risks assumed. In this regard, the ratio of Shareholders’ funds to NEP, (Net Earned Premium) improved to 189.2% in the Q3 of 2020 as against 130.9% in the corresponding quarter of 2019.

In terms of peer-to-peer performance comparison, “Sovereign Trust Insurance Plc did very well when compared with other selected insurers in terms of Capital, Total Assets, Gross Premium Income (GPI) and Net Premium Income (NPI).”

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Banking Sector

Sub Saharan Africa Mergers and Acquisition Transactions Totalled US$ 25.7 Billion in 2020



Sub Saharan Africa Mergers and Acquisition Transactions Totalled US$ 25.7 Billion in 2020

South Africa – Refinitiv today released the 2020 investment banking analysis for the Sub-Saharan African. According to the report, an estimated US$523.7 million worth of investment banking fees were earned in Sub-Saharan Africa during 2020, down 15% from 2019 and the lowest annual total in six years.

Fee declines were recorded across M&A advisory, debt capital markets underwriting, and syndicated lending.  Advisory fees earned from completed M&A transactions generated US$108.3 million, down 55% year-on-year to the lowest level since 2013.  Debt capital markets underwriting fees declined 13% to US$64.9 million, a four-year low, while syndicated lending fees fell 3% to US$263.0 million. Equity capital markets underwriting fees totalled US$87.5 million, almost three-times the value recorded during 2019.

Fees generated in the energy & power sector account for 26% of total investment banking fees earned in the region during 2020, up from 10% during the same period last year, while the financial and technology sectors account for 17% and 13% respectively.  South Africa generated the most fees in the region, a total of US$279.9 million accounting for 53%, followed by Mozambique with 14%. Boosted by lending fees, Sumitomo Mitsui Financial Group earned the most investment banking fees in the region during 2020, a total of US$57.3 million or an 11% share of the total fee pool.


The value of announced M&A transactions with any Sub-Saharan African involvement reached US$25.7 billion during 2020, 62% less than the value recorded during 2019 when Naspers’ US$35.9 billion internet assets spin-off boosted merger activity to an all-time high.  The value of deals recorded during 2020 is the lowest annually since 2012.  The number of deals declined 5% from last year to a seven-year low.

The value of deals with a Sub-Saharan African target declined 39% to a sixteen-year low of US$12.5 billion as domestic M&A within the region declined 44% from last year and the combined value of inbound deals reached just US$7.1 billion, the lowest annual total since 2009.

Chemicals company Sasol agreed to sell a US$2.0 billion stake in LyondellBasell in October, the largest deal in the region during 2020.  Boosted by this deal, materials was the most active sector for deal making during 2020, accounting for 23% of Sub-Saharan African target M&A activity, followed by energy & power (19%) and technology (17%).  South Africa was the most targeted nation, followed by Uganda. Outbound M&A reached a three-year high of US$6.0 billion during 2020, 13% more than the value recorded during 2019.  The value was boosted by Angolan state-owned Sonangol’s purchase of PT Ventures from Africatel Holdings for US$1.0 billion and Templar Investments’ US$1.0 billion offer for Jindal Steel’s Oman unit. With advisory work on twenty deals worth a combined U$4.4 billion, JP Morgan holds to the top spot in the financial advisor ranking for deals with any Sub-Saharan African involvement during 2020.


Sub-Saharan African equity and equity-related issuance reached US$2.5 billion during 2020, 54% more than the value recorded during the previous year, but lower than every other annual total since 2005.  The number of deals recorded increased 19% from 2019 but was lower than any other yearly tally since 2012.  One initial public offering was recorded during 2020, compared to three in 2019.  Malawian telecoms company, Airtel Malawi, raised US$28.7 million on the Malawi Stock Exchange in February. JP Morgan took first place in the Sub-Saharan African ECM underwriting league table during 2020.


The African Development Bank raised $3 billion in a “Fight Covid-19” social bond at the end of March to help alleviate the economic and social impact the Coronavirus pandemic will have on livelihoods and economies in the region.  With this deal, and Ghana’s US$3 billion Eurobond in February, Sub-Saharan African debt issuance totalled US$8.9 billion during the first quarter of 2020, the second-highest first quarter DCM total in the region of all-time.  Only US$1.9 billion was raised during the second quarter, the lowest quarterly total in eight years, followed by US$4.0 billion during the third quarter.  Prosus raised US$2.2 billion in December, boosting fourth quarter bond issuance in the region to US$4.3 billion.  The total proceeds raised during 2020 is US$19.0 billion, down 30% from last year and a four-year low.

Deutsche Bank took the top spot in the Sub-Saharan African bond underwriter ranking during 2020 with US$2.6 billion of related proceeds, or a 13% market share.

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DF Holdings Limited Purchases 474,603,596 Shares of AIICO



AIICO insurance

DF Holdings Limited Purchases 474,603,596 Shares of AIICO

A majority shareholder in AIICO Insurance Plc, DF Holdings Limited, has increased its stake in the company by purchasing additional shares of 474,603,596.

In a disclosure statement published through the Nigerian Stock Exchange (NSE) and signed by Donald Kanu, the Company Secretary, AIICO, DF Holdings Limited purchased the shares on 31, December 2020 from the Nigerian Stock Exchange in Lagos Nigeria.

The 474,603,596 shares were purchased at N1.17k per share. Meaning, DF Holdings Limited invested N555.286 million in AIICO Insurance. See the details below.

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