Just as the global markets show signs of a meaningful post-crisis recovery, major global events set things back again. But against a backdrop of tensions in Russia, a slowdown in China, the Syrian refugee crisis in Europe and the oil price hitting a historic low, a number of companies and banks have managed to churn out stellar deals. The Banker recognises them in 2016’s Deals of the Year awards.
Bonds: Corporates
WINNER: Petra Diamonds $300m bond issue
Joint global coordinator and bookrunner: Barclays, RBC
Bookrunner: Rand Merchant Bank
One of the biggest news stories in the diamonds industry in 2015 was the November purchase of the flawless, 12.03 carats Blue Moon diamond by Hong Kong tycoon Joseph Lau for $49.5m. The diamond had been extracted from a mine run by diamond producer Petra Diamonds in South Africa in 2014, before being sold on, and was the most ever paid for a gemstone at auction.
In May 2015, Petra Diamond also made headlines by tapping the bond market to take advantage of historically low US rates, with a $300m notes issue and an increase to its senior lender debt facilities. The deal marked the international debt capital markets debut for a B1/B+ rated South Africa-based single-commodity producer.
Proceeds from the issue were to be used to repay, without cancelling, the company’s outstanding debt under existing facilities, with the notes issued by the company’s US subsidiary Petra Diamonds US Treasury.
While Petra Diamond wanted to lock in the low rates in an effort to repay its borrowing under existing senior secured-term loans and credit facilities, part of the money was also earmarked to be used to finance future expansion plans, including the construction of a modern processing plant at Petra’s Cullinan mine in South Africa, which currently employs about 1360 people. The new plant is expected to cost about $142m.
The bond issue followed a six-day global roadshow, together with continuous dialogue with investors, with the final orderbook reaching more than $1.1bn. Interest came from a diverse group of investors, with a broad mix of high-yield and emerging market accounts across the US, Europe, the UK and Asia taking part. Roughly 53% of the investors came from the US and Canada, while 40% were from Europe. The International Finance Corporation, part of the World Bank Group, purchased $30m-worth of notes in order to help attract international investors to the South African mining sector.
The interest on the notes, which is due in 2020, will accrue at the rate of 8.25% per year, payable semi-annually.
Bonds: SSA
WINNER: Cameroon $750m debut Eurobond issue
Bookrunners: Société Générale, Standard Chartered Bank
With the low price of oil globally, Cameroon, which relies on the commodity as its main export, turned to the international market in 2015, joining a long list of African countries that have tapped the market in recent years.
In November 2015 Cameroon launched its debut benchmark Eurobond issue, with the country’s first foray into the international sovereign bond market capturing a strong demand, with the orderbook 1.6 times oversubscribed. The $750m Eurobond, which saw Société Générale and Standard Chartered Bank acting as bookrunners, came about after a five-day roadshow and saw more than 134 investors involved.
There was a strong uptake for the bonds from European investors, with UK investors taking 40% of the issue, those in the Benelux and Scandinavian countries taking 19%, and the rest of Europe accounting for 9%. US investors purchased 31% of the issue. Meanwhile 78% of those buying the bonds were asset managers, with 10% hedge funds and 7% banks.
Despite the uncertainty over future commodity prices and a volatile market environment, not to mention the ongoing conflict with terrorist organisation Boko Haram in western Africa, the bond issue, along with others in Africa, shows a clear demand for these types of instruments from African nations. However, Cameroon’s credit rating remains B, five levels below investment grade, at Standard & Poor’s.
The bonds are senior fixed-rate instruments, with a coupon yield of 9.5% and a re-offer yield of 9.75%. The dollar-denominated bonds will mature in November 2025, with three equal redemption payments in November 2023, 2024 and 2025. Fitch and Standard & Poor’s gave them an issue rating of B/B.
With export revenue having fallen in line with the price of oil, the newly raised capital will be used towards a three-year emergency programme in Cameroon to boost economic growth as well as to finance investment projects in the energy sector. The government also plans to use part of the money to refinance a bridge loan for state-owned oil refinery Sonara.
Capital Raising
WINNER: $155m accelerated placement of primary shares PSG Group
Bookrunners: Bank of America Merrill Lynch, PSG Capital
Over the past few years, South African investors have been moving their money overseas, as political upheaval has undermined confidence in the country’s economy. Indeed, South Africa is currently experiencing its longest streak of quarterly outflows since 1999, according to central bank data. However, some have retained confidence and investments continue.
On December 3, 2015, South African investment holding company PSG Group conducted an accelerated placement of shares on the Johannesburg Stock Exchange. The offering consisted of 9 million primary shares, at an offering price of R245 ($16.9) per share, which equated to R2.2bn. Bank of America Merrill Lynch and PSG Capital acted as joint global coordinators and bookrunners.
The company, which provides diversified financial services through its subsidiary PSG Financial Services Limited, with interests in stockbroking, asset management, life assurance and financial communication, plans to use the proceeds to facilitate growth in the group’s existing investments, as well as to fund additional investment opportunities.
PSG Group’s largest asset is its 30.7% stake in Capitec Bank, which is worth about R19.7bn and represents 43% of the group’s assets, followed by its 58.5% share in education provider Curro, which is worth about R8.1bn.
At the time of the placement, PSG Group’s share price was near an all-time high. The shares represented roughly 4.1% of the group’s pre-deal issued share capital and 29 days trading, based on the three-month average daily value traded. In total there was a demand of R3.9bn, which allowed for a 47% upsize in the initial transaction size, from approximately R1.5bn to R2.2bn.
The transaction launched on the back of a confidential pre-sounding exercise, during which a limited number of top shareholders and select investors were reached out to prior to launch. The feedback was positive, providing confidence ahead of the launch of the accelerated placement.
Equities
WINNER: Edita Food Industries $267m IPO
Bookrunners: EFG Hermes, Goldman Sachs
Optimism may be returning to the Egyptian market. In 2015, the initial public offering (IPO) of Arabian Cement Company won The Banker’s Equities Deal of the Year for Africa award, and this year it is the turn of another Egyptian IPO.
The floating of 30% of food and beverage company Edita Food Industries’ share capital in March 2015 was the largest IPO on the Egyptian market since 2007, as well as the largest to date in the Egyptian food and beverage sphere. The listing raised $267m, with the offering priced at the top end of the price range, suggesting an implied market cap of $890m.
Edita is one of the leading and fastest moving consumer goods companies in Egypt and the Middle East, and the second largest player in the Egyptian snack food market, with a 12% market share. With close to 100% brand awareness when it comes to its core cake and croissant brands in Egypt, there is strong potential for the company going forward.
Edita current operates four production facilities, with a total of 24 production lines, and had a compound annual growth rate of 19.6% between 2012 and 2014. Following the IPO, the value of its shares had risen by 59.2% as of March 3, 2016.
The shares were listed on the Egyptian Exchange, as well as on the London Stock Exchange via global depositary receipts, with EFG Hermes and Goldman Sachs acting as bookrunners.
The well-marketed listing saw more than 230 one-on-one meetings and calls in the pre-management roadshow, as well as 50 one-on-one meetings and calls during the roadshow itself, which led to strong bookbuilding momentum with a roughly 78% conversion ratio.
There was a record level of oversubscription for the institutional tranche (13.4x), which represented 85% of the shares offered. There was also a well-balanced demand for the shares by geography, with more than 65% of the book allocated to international investors. Roughly 60% of demand generated was from long-only investors, with the top 20 institutional orders constituting about 35% of total demand.
Green Finance
WINNER: Xina Solar One Power Project
Mandated lead arrangers: Rand Merchant Bank, Absa, Nedbank
In March 2015, in what was the largest project financing transaction ever closed in South Africa, Rand Merchant Bank helped coordinate and lead the financing of the 100-megawatt Xina Solar One Power Project, set to be constructed in the Northern Cape province of South Africa.
With a cost of R10.2bn ($704.1m) and senior debt of nearly R7.5bn, the project, being developed by Spanish firm Abengoa Solar with additional equity being provided by South Africa’s Industrial Development Corporation and Public Investment Corporation, was the largest renewable energy deal in sub-Saharan Africa to date and will likely help push the growth of renewable energy use in South Africa and elsewhere in the region.
South Africa has shown itself keen to utilise concentrated solar power technology in order to meet the country’s energy shortfalls, with the Xina Solar One project the latest step in this direction. It is a follow-on from the 100-megawatt Kaxu Solar One Concentrated Solar Power project, also developed by Abengoa, which Rand Merchant Bank helped close in the first round of South Africa’s renewable energy independent power producer procurement programme. Kaxu started operating in early 2015. The Xina project is located adjacent to this earlier park, enabling Abengoa to transfer skilled workers from the Kaxu project to Xina.
With a focus on energy storage capabilities, the park will be able to store six hours of energy, enabling it to effectively meet peak demand, which occurs in the late afternoon and evenings in South Africa. The project will generate enough electricity to power about 90,000 households.
Rand Merchant Bank acted as the coordinating and lead bank, the account bank, facility agent, mandated lead arranger, lender and hedging bank. Its role as coordination and lead bank required it to manage six other lenders: Absa, African Development Bank, Development Bank of Southern Africa, the Industrial Development Corporation, International Finance Corporation and Nedbank.
The project financing utilised inflation-linked debt (based on the South African consumer price index [CPI]), with this inflation-linked tranche constituting the largest CPI debt tranche to date in the South African renewable project finance market.
Infrastructure and Project Finance
WINNER: $900mn Azura-Edo 450-megawatt open-cycle gas-fired power project
Mandated lead arrangers: Rand Merchant Bank, Standard Chartered Bank, Standard Bank, First City Monument Bank, Siemens Bank
On the whole, 2015 was not a good year for the Nigerian energy sector, with political and economic challenges holding up much-needed development. However, more positive developments did emerge, particularly in power generation, in the final quarter.
Closed on December 28, 2015, and considered Nigeria’s first true independent power producer project, the 450-megawatt Azura-Edo open-cycle gas-fired power plant near Benin City, in Edo State, has helped to establish the framework for private sector investment in power generation in the country. When operational, likely in 2019, the plant will add much-needed capacity to the Nigerian electricity grid, helping further economic growth, while at the same time potentially helping unlock a pipeline of additional projects under development in the country.
The project represents the culmination of the Nigerian government’s efforts over the past five years to reform the power sector in the country, from generation through to transmission and distribution. The financing was the first of its kind in Nigeria, with lenders investing significant long-term capital.
The $900m financing of the project involved 15 global financial institutions from nine different countries providing a combination of debt and mezzanine financing to the project.
A core group of five lenders, including Rand Merchant Bank, was tasked with structuring and executing the transaction. To secure long-term financing, significant groundwork was needed in order to educate regarding the Nigerian investment environment and provide certainty to the investment opportunity.
Many of the key parties to the transaction were newly established, requiring credit enhancement in the form of guarantees provided by the federal government of Nigeria and the World Bank. These guarantees will likely become a reference point for future projects in west Africa. Offshore commercial lenders are covered by political instruments issued by the World Bank Multilateral Investment Guarantee Agency and the International Bank for Reconstruction and Development.
Leveraged Finance
WINNER: Brait Mauritius acquisition of New Look Retail Group for £783m
Joint investment bank and funder: Standard Bank
In June 2015, investment company Brait Mauritius acquired a 90% stake in New Look Retail Group from its previous owners, private equity houses Apax Partners and Primera, in a deal worth £783m ($1.12bn). New Look’s founder, Tom Singh, saw his stake reduced from 22% to 10%.
The acquisition was made possible through an R15.5bn ($1.07bn) round of acquisition funding put together by Standard Bank, which acted as joint investment bank and funder. The funding was structured based on the strength of Brait’s balance sheet and existing investment portfolio, and was a 12-month bridge facility.
The high street retailer, which began in 1969, has more than 500 stores in the UK, as well as 200 across continental Europe, China and elsewhere in Asia. It also has a strong online presence. Revenue from New Look’s continuing operations increased in the auditing year ending March 28, 2015, by £46.5m to £1.41bn, but the company also had a net debt of £1bn at the time of the acquisition.
Apax and Permira had owned the 90% stake in New Look since 2004 and had previously tried to sell in 2007, but failed to find a buyer at the target price, reportedly £2bn.
In early 2015 it was reported that New Look was getting ready for an initial public offering, but later its CEO, Anders Kristiansen, told reporters that the Brait deal offered a stronger option for the business in the long term. The retailer has been valued at £1.9bn.
Brait Mauritius, which is part owned by South African billionaire Christo Wiese, has been building stakes in UK brands. In April 2015 it bought an 80% stake in Virgin Active for £682m.
This latest acquisition will enable Brait to enhance its long-term sustainable growth, as well as diversify geographically and increase its foothold in the consumer sector. Brait plans to leverage New Look’s established UK retail base to capitalise on the high growth regions of China, where it currently has 27 stores, and eastern Europe.
Loans
WINNER: Naspers $2.5bn multi-currency revolving credit facility
Joint global coordinators: Barclays, Citibank Mandated lead arrangers: Bank of China, Absa, BNP Paribas, Citibank, Intesa Sanpaolo, Morgan Stanley, UniCredit, ING Bank, Standard Chartered Bank, Bank of America, Commerzbank, JPMorgan, Goldman Sachs, HSBC, Bank of Taiwan
In a challenging emerging market environment, resulting from lower commodity prices, slower growth in China and emerging market risk aversion, South African internet and media group Naspers was able to quickly and assuredly refinance its existing $2.25bn multi-currency revolving credit facility with a loan that was launched in September 2015 and closed two months later in November.
Barclays and Citibank acted as joint global coordinating bookrunners, following the company’s successful syndication in 2013 and its Eurodollar bond issued earlier in 2015.
E-commerce continues to be a major growth market around the world, and Naspers has a presence in more than 130 countries. The company, which beyond e-commerce is also involved in video entertainment and print, listed on the Johannesburg Stock Exchange in 1994 and has since grown to be part of the exchange’s Top 10 Index, helped by its minority stakes in Chinese social network giant Tencent and Russia’s Mail.ru.
The new facility was marketed in phases, with the bookrunners pre-committing to the facility, followed by invitations to existing and relationship banks and finally a general syndication inviting new banks. Loan participants included key international banks that maintain an appetite for South African investment-grade credits.
The transaction was successfully executed through a syndicate comprising 21 local and international banks, with a $250m accordion option to increase the amount to $2.5bn. The accordion option was exercised almost immediately, within one month of the signature date.
The refinancing ultimately replaced six existing lenders who had lost their appetite with new lenders, as well as increased the commitment of existing lenders, all within a tight deadline.
The revolving credit facility has a tenor of five years, and will be used for general corporate purposes, including refinancing of existing group facilities.
M&A
WINNER: Al Ahli Bank of Kuwait acquisition of Piraeus Bank Egypt
Financial adviser to Al Ahli Bank Kuwait: JPMorgan
Financial adviser to Piraeus Bank: Mediobanca
Despite the country’s continued political instability, the size of the Egyptian population and the general lack of penetration in the banking sector make it an enticing destination for international banks.
In October 2015, Al Ahli Bank of Kuwait (ABK) acquired Piraeus Bank Egypt, the Egyptian subsidiary of Greece’s Piraeus Bank, with the deal closed in just six months. The acquisition was worth $150m, with the bank making a one-off gain of $27m, which went directly into precautionary provisions. The acquisition marks a diversification for ABK, from traditional Gulf Co-operation Council market fundamentals into less oil-dependent economies.
Egypt’s banking sector is an attractive market, and as the political situation hopefully stabilises it will become even more so. By acquiring Piraeus Bank Egypt, ABK has gained an experienced workforce able to help it expand and also improve on best practices, especially in IT infrastructure, risk management and corporate governance. The acquisition also represents an opportunity for ABK to grow its retail and corporate portfolio, both in Kuwait and internationally, and potentially outsource some operations in order to reduce costs. Kuwait currently has one of the largest expat Egyptian populations, and the deal could also help ABK grow its presence among Egyptian businesses and individuals in Kuwait.
Multiple bidders expressed interest in Piraeus Bank Egypt at the commencement of the process, with Egypt’s central bank having not offered any new banking licences in the past decade. Therefore acquisitions such as this one offer the only way for international banks to establish a presence in the country.
The deal was pushed through quickly. ABK was able to convince all the regulatory bodies, including both countries’ central banks, to green light the deal in less than six months, while banking deals in Egypt have historically taken more than a year to close.
With the Egyptian banking sector likely to see more acquisitions and consolidations in the future, the value of banking sector assets will rise, making this acquisition even more promising.
Restructuring
WINNER: Acugus IV $445m facility
Mandated lead arranger: FBN Quest
Term facility lenders: First Bank of Nigeria, FBN Bank UK, FCMB, Ecobank, UBA, Union Nigeria, Union Bank UK
The dip in global oil prices starting in 2014 hurt Nigeria, but oil and gas remain key industries for the country. Domestic gas demand is expected to grow by an average of 11.3% a year until 2025 in the country.
Seven Energy International, a Nigerian oil and gas company, has been expanding in recent years. The company aims to become the leading supplier of gas in the domestic market, for both power generation and industrial consumption, and in 2015 sought to restructure its existing debt for its wholly owned mid-stream business Accugas. The goal was to refinance Accugas’ existing $385m debt, while raising near-term capital expenditure and also working capital requirements.
Prior to the closure of the deal, existing loans, made for the construction or acquisition of domestic pipelines, were managed under separate loan agreements, making the administration and financial covenant reporting cumbersome. The company also sought better loan terms, with Accugas now in an operational phase with minimal construction or project risks that could be passed on to lenders.
FBN Quest, the merchant banking and asset management business of FBN Holdings, was appointed initial mandated lead arranger for the $445m senior secured-term loan and $50m (naira equivalent) revolving working capital facility, in one of the major restructuring deals in Nigeria in 2015.
Following the loan deal, the company’s existing $225m (Accugas II) and $160m (Accugas III) facilities were collapsed into one loan facility, with the financial covenants and other reporting obligations consolidated for ease and efficiency. Accugas has also been able to save on principal and interest repayments on the Accugas II and III facilities, which were due to commence in March 2015.
Accugas is the only privately owned company that is involved in the entire gas value chain in Nigeria, from sourcing to processing and transportation. The term loan was supplied by a consortium of local and international banks, including the First Bank of Nigeria, FBN Bank UK, Ecobank and Union Bank UK.
Securitisation and structured finance
WINNER: $760m multi-currency refinancing package for Rio Tinto Group
Sole adviser and bookrunner: Rand Merchant Bank
Mandated lead arrangers: BNP Paribas, Société Générale, Crédit Agricole, Bank of Tokyo Mitsubishi, Mizuho, Sumitomo Mitsui Banking Corporation, Nedbank, Absa, Standard Bank, ING
Mining remains big business. In November 2015, Rand Merchant Bank coordinated a $550m and R2.5bn ($172.6m) multi-currency refinancing package for Richards Bay Minerals, the largest South African operation of the Rio Tinto Group, itself the second largest mining company in the world by market capitalisation. At a time when many lenders are withdrawing from the resources sector and South African credit spreads are expanding, the transaction saw lenders commit to a seven-year tenor worth roughly $760m.
The transaction is one of the largest bank-arranged debt financings in the South African market to date. The funding optimised Richards Bay Minerals’ balance sheet, and is set to support company projects and extend the life of its operations by more than 20 years. It also provides essential protections required by lenders, without introducing the risk of hair-trigger defaults or constraints on operational flexibility.
Richards Bay Minerals, a world leader in heavy mineral sands extraction and refining and South Africa’s largest mineral sands producer and beneficiation company, is 74% owned by Rio Tinto. It has a global market share of about 25% of titanium dioxide feedstock, along with 33% of the world’s zircon output and 25% of high-purity pig iron.
Rand Merchant Bank led the transaction as the sole bank, securing funding from Africa, Europe and Asia without needing the partnership of international banks for underwriting or co-arranging. The bank syndicate that issued the refinancing package comprised a total of 11 banks, including three Japanese banks, three French banks, four South African banks and one from the Netherlands. It also marked Richards Bay Minerals’ maiden debt raise on the international market.
Prior to the package, Rio Tinto had invested $1.8bn in Richards Bay Minerals since 2012. In February it was announced that the company plans to expand its mining operations to help sustain its smelting output at its plant on the east coast of South Africa.
