The National Development Bank (NDB) rose to the challenge Friday afternoon as it floated a P 100 million senior unsecured bond on the Botswana Stock Exchange (BSE) that will provide it with cheap credit lines to give loans.
The 10-year bond, issued on August 24, 2007, carries a coupon rate of 11.25 percent per annum and was over subscribed 2.5 times ( 250 percent).
Speaking at the listing of the bond, Deputy Managing Director for the Stanbic Bank of Botswana, Leina Gabaarane, whose Debt and Capital Markets team structured the paper, said the listing ‘marked a significant milestone” for NDB and is one of the quality papers in the market.
“We are beginning to see good quality paper in the market and the NDB one is one of them,” he said.
The move comes at a time when the BSE is faced with the problem of illiquidity and lack of instruments for the cash-awashed investors looking up at the market as an investment home.
The monied guys include banks, insurance companies and pension funds that, among themselves, are hungry for investment opportunities.
Further, the decision falls in place with government’s plan to develop the capital market through listing on the BSE with the view of establishing the yield curve. In 2002, the government took a bold move by selling its Public Service Debt Fund (PSDF) by listing it on the stock exchange.
And at the same time it encouraged parastatals to do the same in a bid to raise cash as it warned it embarked on cost cutting measures. The intention is two pronged: to improve productivity and, at the same time, develop the capital markets.
NDB’s General Manager, Oatsi Ramasedi, said the issuing of the bank’s median bond provides them with cheaper lines of credit which will see them having to stand against competition in issuing of loan facilities to their clients.
“We are now participants in the capital markets and we are going to tap into the cheaper loan facilities,” Ramasedi said.
The NDB further said the proceeds will be used to refinance short-term debt and fund its strategy for the next five years. The NDB’s move is expected to open floodgates of bond issuing during the second half of the year coming from the mining sector and other parastatals.