- Funds holding $364 million can invest up to 30% in debt
- Regulator expects debt sales to rise on support from funds
Ghana Home Loans Ltd. is among at least three companies in the West African nation planning bond sales this year as they seek to attract investors from local private pension funds, whose assets under management surged by 75 percent in a year.
The mortgage lender, owned by Abraaj Group Ltd. of Dubai, intends to raise the equivalent of $100 million over five years by listing debt for the first time, according to the Securities and Exchange Commission in the capital, Accra. Wealth manager Databank Group Ltd. is helping prepare debt sales by two financial service companies, said Armah Akotey, the firm’s brokerage head.
“We should see brisker activity, because issuers have seen the availability of investible funds in the pensions area,” said Jacob Aidoo, head of issuers at the SEC. “The liberalization of the pensions market is driving the increase in corporate bond issuance we’re witnessing.”
Ghana ended the state pension fund’s monopoly in 2012, creating an industry that oversaw 800 million cedis ($208 million) by June 2014 and 1.4 billion cedis a year later. The private funds can allocate as much as 30 percent of their holdings to corporate bonds traded on the Ghana Stock Exchange and the Ghana Alternative Market. That encouraged three companies to list debt in 2015, a figure the regulator expects to rise this year.
Last year, Bayport Financial Services Ghana Ltd., AFB Ghana Plc and Edendale Properties Ltd. raised a combined 350 million cedis, compared with the 80 million cedis sold by Izwe Loans Ltd. in 2014, the country’s first listed corporate debt in seven years. Frontier-market corporate bond issuance increased 43 percent this year to $2.16 billion, according to data compiled by Bloomberg.
The Ghana Stock Exchange set up the alternative market in 2013, targeting companies seeking reduced listing costs and lower thresholds than required by the main board. That’s helping to spur bond sales that attract investors seeking the ability to buy and sell the securities, said Randy Mensah, head of equity trading at Ecobank Development Corp. in Accra.
“Looking at the size of some of the companies that it tends to attract, those may not meet the full requirement of coming onto the main exchange,” Mensah said by phone. “Listing the debt gives investors the comfort and confidence that they can exit whenever they want.”
The pricing of corporate bonds, which pay a premium above the government’s 182-day bills, makes them attractive to investors, Databank’s Akotey said. The 182-day yield increased to 24.6 percent at its last auction on March 4. The yields reflect inflation, which rose to a record 19 percent in January before easing to 18.5 percent last month. The central bank increased its benchmark interest rate by 400 basis points since July to a 13-year high of 26 percent. The cedi was 0.2 percent stronger at 3.855 to the dollar at 2:21 p.m. in Accra.
“We expect some more issues during the first half,” the SEC’s Aidoo said. “Advisers have been talking to a number of small and medium-sized businesses, putting their books in order so that in the next two to three years they can list .”