Sunday, November 29, 2020

BHC brightens market with bond issuance

Botswana Housing Corporation (BHC), the giant government underpinned property development company, is to power the local capital market with two bonds that were overwhelmingly received at a time when the market is in a silly period.

The two bonds BHC 020 and BHC 017 worth P 300 million in total will be listed on the Botswana Stock Exchange (BSE) tomorrow (Monday) and are part of the P2 billion  programme aimed at securing future funding needs for the organisation.

The latest development will come with the trail-blazing development on the BSE since one of the bonds will provide a┬áfloating rateÔÇöthat even beats the Bank of Botswana┬á Certificates (Bobcs).
The short term floating note BHC 017 attracted sensational interest from investors as it got oversubscribed by nearly 200 percent while the long term 10-year fixed bond, BHC 020 mutely rose by 115 percent.

The BHC 017 bond ÔÇô the floating bond┬ápegged against the Bank of Botswana Certificates (Bobcs)ÔÇö worth P 150 million┬áattracted a lot of┬áappetite┬áas it┬áwas┬á191┬ápercent┬á oversubscribed or┬áhit┬á P286┬á million in terms of subscription.┬á

The bond will pay dividend on 91 days at a rate of 170 basis points above the Bobcs rate.

The┬ámove┬áwill mean that the┬á BHC┬ábecome the┬á darling of┬á punters┬áon the short term savings┬áas it┬á beats the BobcsÔÇöwhich has become the cash cow of the top local commercial banks. However, BHC 017 shortfall is that it is small in terms of value┬ábut┬áits benefits are widely┬áspread┬ábecause it is not geared to a specific┬áclub of market players.┬á

Further, BHC 017 still has a balance of P286 million to be issued at a later date under the same tranche.
Meanwhile, BHC 020 bond tranche with a 10 year maturity, which was earmarked to raise P 150 million, was 115 percent up as it netted P 173 million in terms of subscription.

The bond is priced at 10.1 percent to maturity and is left with a balance of P 103 million to be issued at a later date.

BHC, which is into property development, renting and selling, resorted to the idea of breathing life into the domestic capital markets after a grilling attack in the past when it resorted to borrowing money cheap from China.

The move offended market commentators because it excluded  the local pension funds, insurance companies and other players that  are awash with cash, looking for investment homes.
Another controversy with the Chinese money was that it came┬áwith some strings attached; that meant that only Chinese companies┬ácould tender for BHC’s┬ámulti- million┬áconstruction projects.

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Sunday Standard November 29 – 5 December

Digital copy of Sunday Standard issue of November 29 - 5 December, 2020.