Water Utilities Corporation (WUC) the water distribution company in the urban and peri-urban centers shined on the local bourse Thursday as it listed two bonds worth P 400 million in a bid to finance its debt which has been punching through the roof.
The two bonds, WUC 001 and WUC 002, have a face value of P 195 million and P 205, respectively.
The two bonds are long dated, one being for a period of 10 years while the other one is for 18 years and they carry a coupon rate of 10.65 percent and 10.60 percent.
“We are very happy to note that the market has positively shown significant interest and confidence on our business activities. This development will go a long way in helping government’s efforts to encourage institution such as ours to seek alternative funding of major projects rather than rely on government coffers,” WUC’s Chief Executive Officer, Fred Maunge, said.
WUC has been using government and other international institutions to finance its project but that has been costly since they were borrowing in hard currencies. The dicey part of that has been the exchange rates, which are unfavourable to weaker currencies, such as Botswana Pula.
However, the current move of listing a bond to the tune of P 4 00 million was aimed at setting off a loan from the Southern African Development Bank of South Africa, which is Rand denominated, and some loan from Botswana government.
Further, the initiative is expected to help in the growth of Botswana’s fledgling capital market whose woes are worsened by illiquidity.
Observers have said the reason why the market is so illiquid is that there are very few instruments to invest in, hence investors prefer to hold on up to the point of maturity.
WUC and its advisors, Absa Capital and Barclays Bank Botswana have been burning midnight oil over the issuance of this bond for over a year.
“Now am sure the finance department would be able to make predictable financial plan. In the past, we used to borrow from international financial institutions in hard currency and when currencies fluctuated, it made it impossible to redeem the loans. The loans kept on being expensive and we are today delighted to borrow from the local market,” said Maunge.
The favourable support for the bonds was illustrated by the high level of oversubscription on both of the WUC bonds collectively by 124% with BWP894 million in total bids received.
“There is no need for Botswana parastatals to go outside for funding,” the Chief Executive Officer of the Botswana Stock Exchange, Hiran Mendis, said Thursday, pointing out that the country is awash with a lot of cash.
The pension fund industry is said to be holding on P 34 billion which is looking for investment opportunities while the commercial banks are stuck with about P 20 billion looking for credible borrowers.
However, the new company’s act which went through parliament last year might rescue the situation which forces all companies which make a turn-over of P 10 million to be audited.
With that in mind business sector will get used to the culture of accountability and with time will ease fears of entering the BSE boardsÔÇöeither venture capital or main boardÔÇöto raise funds or embarking on the citizen empowerment strategy. That is expected to be supported by the impending financial reporting bill which might be gazetted before the end of the year.
Though the aim of the financial reporting bill is streamlining and standardizing the accounting system in the country, it would discourage companies and accounts to collude in terms of under reporting the financial performances of the companies.