A look at the year's most noteworthy deals in Africa.

Bonds: Corporate

Winner: Sasol’s $2.25bn dual-tranche senior unsecured notes

Lead debt adviser to Sasol: Rothschild & Co

Joint active bookrunners: Bank of America Merrill Lynch, Citi, JPMorgan

Passive bookrunners: Barclays, HSBC, Mizuho Securities, MUFG, SMBC Nikko

The largest corporate issuance out of Africa in 2018, Sasol’s $2.25bn dual-tranche senior unsecured notes succeeded in spite of volatile conditions for emerging market debt. A key ingredient was the repositioning of the energy company as a global business rather than simply a South Africa-focused emerging markets issuer.

In size and significance, the transaction ticked a number of boxes. It was Sasol’s first public bond since 2012 and the sector’s largest US dollar deal from Africa in a decade. It was also the first Securities and Exchange Commission-registered corporate issue out of Africa since 2015.

The proceeds were used partly to repay a $4bn project finance facility for the company’s ethane cracker being built at Lake Charles Chemical Project in Louisiana. The refinancing of secured debt by unsecured notes led to a Standard & Poor’s upgrade, regaining investment grade status for Sasol’s senior unsecured notes, and thereby broadening the investor base.

The deal was launched after meetings and calls with more than 50 investors in London, Boston and New York. Initial pricing thoughts for a dual-tranche benchmark were US Treasuries plus low 300 basis points (bps) for a five-and-a-half year bond and US Treasuries plus high 300bps for a 10-year.

The order book exceeded $4bn, with three-figure orders from a substantial number of high-quality accounts. The offering was eventually priced at the tight end of both ranges – US Treasuries plus 295bps for the five-and-a-half year (sized at $1.5bn) and US Treasuries plus 345bps for the 10-year ($750m). The coupons were 5.875% and 6.5%, respectively. Both bonds have since traded upwards.

Apart from the credit rating, other positives for Sasol included further diversification of funding sources from the bank to the bond market, and the creation of a more balanced debt maturity ladder. The deal reopened the general emerging market and African corporate bond market after a couple of months in the doldrums.

Bonds: SSA

Winner: Senegal’s $2.2bn-equivalent dual-tranche Eurobond

Sole financial adviser: Rothschild & Co

Bookrunners: Citibank, Deutsche Bank, Standard Chartered, BNP Paribas, Société Générale, Natixis

In a record year for African sovereign issuance, the Republic of Senegal was able to execute its largest ever bond deal, with its lowest ever coupons, while issuing its first 30-year paper.

This was also the sovereign’s first dual-currency transaction. The $2.2bn-equivalent deal included a $1bn 30-year tranche and a €1bn 10-year tranche, the latter being Senegal’s first euro-denominated Eurobond. In addition, this was the first amortising euro-denominated public benchmark priced by a sovereign issuer.

The issue was accompanied by a $200m liability management exercise, tendering for Senegal’s existing 8.75% notes due in 2021. The tender offer allowed the sovereign to manage proactively both the refinancing risk posed by the maturing eurobond and interest rate risk in the context of rising rates, bankers said.

The transaction took place against the backdrop of the Emerging Senegal Plan, an infrastructure and reform programme that aims to make the country a middle-income economy by 2035. So besides paying off old debt, the proceeds were used to fund infrastructure projects being undertaken as part of the programme.

The issue was nearly five times oversubscribed, with order books totalling $10.6bn equivalent from more than 440 investors. Pricing was tightened by 50 basis points on both tranches, leaving the euro tranche with a 4.75% coupon and the longer dated dollar tranche paying 6.75%, the tightest for a sub-Saharan African 30-year bond (excluding South Africa).

The tender offer was originally capped at $150m. However, after receiving tenders of $351m, or 70% of the outstanding amount, the final acceptance amount was increased to $200m (40% of the outstanding amount).

Corporate carveouts

Winner: Old Mutual's managed separation

Joint financial advisers: Bank of America Merrill Lynch, Rothschild & Co

One of the most complex corporate reorganisations of recent times, the managed separation of London- and Johannesburg-listed Old Mutual (OM) split the business into four core units to streamline the organisation and enhance shareholder value.

The reorganisation was announced in March 2016. On completion more than two years later, the company had obtained about 100 regulatory approvals, distributed some £13bn ($16.82bn) in capital to shareholders and raised £260m in an initial public offering. It had placed more than $500m in three secondary accelerated placements, tendered over £1bn in legacy debt and sold $1bn of assets around the world.

The upshot was four separate businesses. The first was Old Mutual Asset Management (OMAM), renamed BrightSphere Investment, a US-based multi-boutique asset manager. OMAM had been listed on the New York Stock Exchange in 2014. OM subsequently exited its 66% stake in OMAM via two accelerated bookbuilds and a block trade.

Old Mutual Wealth, a UK-based wealth manager, has been renamed Quilter. The business was distributed to existing OM shareholders via listing in London, with a secondary listing in Johannesburg.

Old Mutual Limited (OML) is the sub-Saharan African insurance business, formerly known as Old Mutual Emerging Markets (OMEM). It was established as a new company incorporated in South Africa, becoming the holding company for OM, OMEM and the group’s 52% stake in Nedbank, a leading South African universal bank.

Today, OML retains a 19.9% stake in Nedbank, the balance having been distributed to OML shareholders. The Nedbank unbundling was the final step in the value-unlocking process. In all, the managed separation saw one of Africa’s largest financial institutions return to Africa in a complex, high-profile and transformational transaction, bankers said.

Equities

Winner: Naspers’s $9.8bn accelerated bookbuild of Tencent shares

Joint global coordinators and bookrunners: Bank of America Merrill Lynch, Citi, Morgan Stanley

Sponsor: Investec

The Naspers selldown of a 2% stake in Chinese internet business Tencent was the largest secondary accelerated placing of all time that was not a privatisation. Only the US government’s sales of its stakes in AIG and Citi were bigger.

Naspers, a global internet and entertainment group, is the largest company on the Johannesburg Stock Exchange, accounting for nearly one-fifth of its total market capitalisation. It began as a newspaper publisher in 1915 but radically changed its fortunes in 2001 when it bought 33% of Tencent, then a start-up, for $32m. Tencent’s present market value is in excess of $400bn.

In March 2018, Naspers announced the intention to reduce its stake in Tencent to 31%. This came on the back of a strong rally in the Chinese firm’s share price, which rose by about 95% in the previous 12 months.

Naspers aimed to maximise its proceeds from the disposal, using the funds to reinforce its balance sheet and invest globally in its favoured sectors of classified advertising, online food delivery and fintech.

Given the size of the deal, Naspers employed three bulge-bracket banks to distribute the shares across four continents. Sales teams from Johannesburg, London, New York and Hong Kong worked together on the transaction.

With no pre-announcement, books were covered two hours after the launch, despite a tough market backdrop. The syndicate generated total demand of $23bn. The sell-down priced at HK$405 ($52) a share, a 7.8% discount to the previous closing price, raising gross proceeds of $9.8bn. It was the largest ever cross-border equity capital markets transaction, and the largest global tech follow-on in history.

FIG financing

Winner: African Export-Import Bank’s $500m Eurobond

Joint lead managers and bookrunners: Barclays, HSBC, MUFG, Rand Merchant Bank, Standard Chartered

Last year was choppy for emerging market bonds in general, and those from Africa in particular. One consequence was that only one sub-Saharan supranational managed to issue in 201: African Export-Import Bank (Afreximbank). Its $500m Reg S-only deal was twice oversubscribed, despite volatile conditions.

Afreximbank had staged a five-day roadshow in May 2018, taking in Asia, London and continental Europe. The plan was to follow up in short order with a deal to help meet the bank’s funding requirements for the year. Even before the roadshow ended, however, appetite for emerging market securities took a tumble. With political and monetary uncertainty in Turkey and Argentina, the issuer chose to postpone any transaction and wait for a suitable market window.

Such a window appeared to present itself early in October, as market volatility subsided and credit spreads tightened. A transaction was duly launched via a two-day process, starting with a global investor call. The bookbuild commenced a day later.

Initial price thoughts for a five-year transaction were announced at mid-swaps plus 225 basis points (bps) and the books grew quickly to more than $1bn. As a result, pricing on the $500m bond could be tightened by 15bps to five-year mid-swaps plus 210bps. The coupon was 5.25% and the reoffer yield 5.269%.

The UK and Europe took almost two-thirds of the deal between them, at 33% and 32%, respectively. Asia took 17%, with Middle East and Africa accounting for another 4%. Fund managers were allocated 79% of the bonds, with 10% going to agency investors and 9% to banks and private banks.

Green finance

Winner: Growthpoint’s R1.1bn inaugural green bond

Sole lead arranger: Rand Merchant Bank

The inaugural green bond issued by South Africa’s Growthpoint Properties was the first corporate green bond to be listed on the Johannesburg Stock Exchange’s green bond segment, a subsector of its interest rate market.

The instruments were the first where the Green Building Council of South Africa assessed the Green Star rating of the buildings that would be refinanced by the debt raised. Bankers said this was the most efficient manner in which to obtain independent verification of green status “for a client that consistently places great emphasis on sustainability throughout its organisation”.

There were three notes on offer, a five-year, a seven-year and a 10-year. The transaction gave the issuer access to a new pool of liquidity from investors looking to deploy environment, social and governance-related funds, more cheaply than in the past.

The auction attracted more than R3bn ($209.7m) in demand across the three notes. They priced at 139 basis points (bps) above the three-month Johannesburg Interbank Average Rate for the five-year, 169bps for the seven-year and 200bps for the 10-year. The five-year and seven-year bonds priced tighter than Growthpoint’s existing bonds of the same tenors. The 10-year, which made up more than half of the final allocation, raised significant demand from investors including international players with exclusively green mandates.

Until now, local sustainable investors have only been able to buy municipal green bonds, such as those issued by the City of Cape Town. Bankers said that the deal would pave the way for other listed property issuers to follow suit.

High-yield and leveraged finance

Winner: CIVH’s funding to acquire Vumatel

Mandated lead arranger and sole funder for CIVH: Rand Merchant Bank

Funders for Vumatel expansion: Investec, Rand Merchant Bank, Standard Bank

CIVH secured an innovative end-to-end investment banking solution to carry out its acquisition of Vumatel, including South Africa’s first standby equity underwriting. The structure lets the borrower switch out of mezzanine and into senior debt as soon as earnings allow.

CIVH is a holding company that owns Dark Fiber Africa (DFA), a South African open-access fibre provider. It is owned by a group of entrepreneurial investors including Johannesburg Stock Exchange-listed Remgro.

Vumatel has an open-access fibre-to-the-home network that it leases to internet services providers. Its shareholders include Investec Equity Partners. Both Vumatel and DFA continue to roll out their networks. But, as Vumatel chairman Niel Schoeman has said, telecoms require scale to be efficient for the broader community.

In 2018, CIVH acquired a 35% stake in Vumatel, with an option to buy the balance subject to Competition Commission approval. Rand Merchant Bank’s investment banking solution included merger and acquisition advice, bridge funding and term funding. The R3.5bn ($244.6m) bridge funding was refinanced by a combination of equity raised, preference share funding and term loans.

The initial debt is underwritten by a standby rights issue to the extent necessary. The second tranche is an additional R1.3bn of preference share funding, to be used to part-finance the acquisition of the rest of Vumatel. Vumatel also needed a substantial R4.5bn limited recourse facility to allow it to continue rolling out its fibre network. The facility provided the early-stage funding to roll out the network but will automatically reduce the cost of the debt package as the business grows into its facility.

The funding provided CIVH with the necessary flexibility given its limited cashflows as a holding company, and the time it needs to execute on its strategic objectives, bankers said.

Infrastructure and project finance

Winner: Geita Gold Mining’s $115m dual-currency loan financing

Sole mandated lead arranger and bookrunner: Nedbank Corporate and Investment Banking

Facility A (US dollars) lender: Nedbank Corporate and Investment Banking

Facility B (Tanzanian shillings) lenders: First National Bank Tanzania, Standard Chartered Bank Tanzania, NMB Bank, National Bank of Commerce, Stanbic Bank Tanzania, Ecobank Tanzania

In a landmark dual-currency deal for Tanzania, Geita Gold Mining (GGML) was able to borrow $115m with the unsecured participation of local banks at a time when local regulations were evolving.

GGML is one of the largest corporates in Tanzania, and one of the largest mines in the AngloGold Ashanti portfolio. It needed project financing to expand underground operations. However, in 2018 the Tanzanian government introduced new local content regulations that sought to achieve broad-based participation of indigenous enterprises in the mining sector. That includes the provision of financial services.

Local banks have traditionally had limited interaction with the large global miners that operate in the country and typically procure financing elsewhere. In addition, foreign investment in Tanzania’s mining sector has been muted since the imposition of taxation-linked fines on Barrick Mining’s Acacia Mining.

Nedbank CIB underwrote the entire $115m transaction and then began the process of distributing a portion of the exposure in Tanzanian shillings. The market was sounded out and interested lenders provided non-binding expressions of interests. Based on the responses received, final commercial terms were distributed to banks.

In order to accommodate indigenous Tanzanian banks, their accession into the facilities had to be managed on a bespoke basis, unlike traditional underwritten syndications. Nedbank navigated lenders through the regulatory changes and risk mitigants inherent in the transaction, giving them time to get comfortable with the deal.

The result was a first-of-its-kind syndicated Tanzanian shillings mining transaction, using a mechanism where acceding Tanzanian shillings lenders de-risked the existing US dollar lender. It provided certainty for GGML, while sounding out the market for credit appetite among local lenders to participate in local currency.

Islamic finance

Winner: Nigeria’s N100bn government sukuk

Joint lead managers, financial advisers and bookrunners: FBNQuest Merchant Bank, Lotus Financial Services

Last year’s Deals of the Year awards named Nigeria’s inaugural sovereign sukuk as the best Islamic finance deal from Africa in 2017. It served its purposes so well that the Nigerian government waited little more than a year before repeating the exercise, in a transaction that again stood out as the most notable of its kind in 2018.

The 2017 sukuk raised N100bn ($277m) in funds to help close the country’s infrastructure gap. Nigeria has the largest Muslim population in sub-Saharan Africa (about half of its 190 million population), so Islamic finance is a natural addition to the funding tools of the national debt management office (DMO).

Last December, the DMO returned to market with what was essentially the same deal. One of the federal government’s declared aims was again to support the development of infrastructure across the country (roads in particular). Others included promoting financial inclusion and building an investment culture among retail investors, offering government-issued investment alternatives to ethical investors and continuing to deepen the Nigerian capital markets by establishing a benchmark for pricing other sukuk.

This sukuk was a seven-year instrument, structured as an 'ijarah' or leasing contract, and paying a rental rate of 15.74%. It included certain features that made it similar to conventional sovereign bonds, which encouraged participation by banks and other institutional investors, bankers said. The sukuk was certified compliant with the principles of Islamic sharia by the Financial Regulation Advisory Council of Experts of the Central Bank of Nigeria.

While the 2017 issue enjoyed a 103% oversubscription, the 2018 deal was 132% oversubscribed – partly due to growing familiarity with the concept, bankers believed. Certainly there was a higher participation by retail investors, who took 12.3% of the final allotment, compared with 6.7% in the original transaction.

Loans

Winner: Telecom Egypt’s $500m syndicated loan facility

Lead arrangers and bookrunners: First Abu Dhabi Bank, Mashreqbank

Participating banks: Arab Bank, Arab Banking Corporation, National Bank of Kuwait, Union National Bank, Industrial and Commercial Bank of China, Ahli United Bank, Ahli Bank of Kuwait, Attijariwafa Bank Europe, Bank of Jordan, BMCE Bank, ICICI Bank

Telecom Egypt successfully concluded its first syndicated loan in the international market. The $500m transaction was oversubscribed and included a greenshoe option to upsize to $550m at the lenders’ discretion.

Telecom Egypt is the oldest and largest telecoms company in Egypt, 80% state owned, and listed in London and Cairo. The funds were needed partly to pay 4G licence fees to the National Telecom Regulatory Authority, as well as making payments to capital expenditure-related and strategic equipment suppliers.

The five-year facility is provided against the borrower’s offshore foreign currency receivables related to interconnection, roaming and cable agreements with third parties. The transaction structure benefits from an irrevocable and acknowledged payment undertaking to a ring-fenced offshore revenue account.

It was 1.4 times oversubscribed, with commitments from banks of up to $700m, so commitments were scaled back at signing. The transaction saw participation from several leading regional and international banks, and represented a landmark for Telecom Egypt, as it first syndicated foreign currency facility.

The financing allows Telecom Egypt to monetise its foreign currency receivables appropriately while optimising its balance sheet profile, bankers said. They added that the telecoms firm represented a key relationship for international and regional banks and participation in the syndicated term loan was strategically important for those involved.

M&A

Winner: Vodacom’s R16.4bn Black Economic Empowerment transaction

Financial adviser and sponsor to Vodacom Group, debt arranger and co-funder to YeboYethu: Rand Merchant Bank

Financial adviser to Vodafone: Rothschild & Co

Financial adviser, co-funder and sponsor to YeboYethu: Absa

Co-funder to YeboYethu: Nedbank

Black share ownership in South Africa received a boost when Vodafone renewed its Black Economic Empowerment (BEE) arrangements, due to expire 10 years after they were set up. The cost of replacing the original stock distribution transaction was lowered via gearing, and BEE shareholders received a special dividend.

In 2008, Vodacom South Africa (SA) carried out a R7.5bn ($522.7m) BEE exercise, which placed 6.25% of its shares with YeboYethu (listed on the BEE segment of the Johannesburg Stock Exchange), Royal Bafokeng Holdings (RBH) and Thebe Investment Corporation. Individual black investors could participate by buying YeboYethu shares, and more than 100,000 did.

The plan was to unwind the scheme in October 2018. The unwinding duly took place, paying a cash dividend to existing investors. Shortly before that, however, Vodafone set up a new BEE transaction to replace the old one, extending its life by another 10 years.

The unwinding of the old deal delivered some R7.12bn of value, or 6.4 times BEE shareholders' original capital. They then reinvested R3.86bn in the new deal. The new scheme differs in a number of ways. RBH and Thebe have exchanged their shares in Vodafone SA for shares in YeboYethu, and YeboYethu has exchanged its Vodafone SA holding for shares in Vodafone Group. This is unusual for BEE transactions, which generally focus on South African operations and do not give investors international exposure.

YeboYethu issued R9.91bn of preference shares to third-party banks and Vodacom at attractive pricing, and used the proceeds to buy new shares in Vodacom at a R1.95bn discount. This was the largest BEE transaction in the information and communications technology sector, and secured the cheapest funding rate for a BEE transaction. It increased Vodafone’s effective BEE ownership from 17% to 20%. The transaction was a win-win for both the company and its BEE shareholders, bankers said, pointing out that this was a rare feat.

Restructuring

Winner: Moza Banco’s restructuring programme

Restructuring agent: Moza Banco

Mozambique’s loss-making Moza Banco has undergone a complex restructuring that involved a capital reduction, the introduction of a new international shareholder and the acquisition of a smaller competitor.

Banks in Mozambique have been through a testing time. Economic growth has fallen, a US dollar shortage has reduced foreign exchange transactions and non-performing loan levels have doubled in the past two years.

Moza Banco, founded in 2008, had been one of the country’s fastest growing institutions. Following Mozambique’s hidden debt crisis in 2016, however, it had to be rescued by the central bank, whose pension fund, Kuhanha, took over Moza Banco the following year.

Losses have since been reducing, though banking reforms have been adding to pressures on all local banks. These include an increase in capital requirements and the raising of the minimum capital adequacy ratio from 8% to 12%. Banks have also had to acclimatise to IFRS 9 in calculating impairments.

Moza Banco has responded with a thorough restructuring. It began in June 2017 with a recapitalisation. First, negative retained earnings were absorbed via the share capital, leading to a reduction in each share’s nominal value from 25,000 meticais ($389) to 5000 meticais. 

Next, new shares worth $53m equivalent were taken up by Arise, an African investment company owned by Rabobank, Dutch development bank FMO and Norway’s Norfund. Arise now owns 29.5% of the Moza Banco, with Kuhanha’s stake down to 59.4%.

Arise already owned Banco Terra Mozambique (BTM), and the next step was for Moza Banco to acquire 100% of BTM, making the combined organisation Mozambique’s third largest bank. Moza Banco now enjoys an improved risk perception and rating, and its international business has been reinvigorated.

Securitisation and structured finance

Winner: Sarwa’s E£2bn multi-tranche asset-backed securitised bond

Mandated lead arrangers, underwriters and bookrunners: Banque Misr, Arab African International Bank, Ahli United Bank, Commercial International Bank

Financial adviser and lead arranger: Sarwa Capital

Sarwa executed Egypt’s largest ever multiple-tranche issue of asset-backed securities (ABS), backed by auto loans. The size was even more notable given the difficult market environment and Egypt’s slowing economy.

The E£2.03bn ($115.5m) transaction was the 27th in a series begun by Sarwa Securitization Co back in 2005. The company was set up as a special purpose vehicle by Sarwa Capital, which owns Contact Auto Credit, Egypt’s leading auto credit and trading business. Contact was the first company to offer white-labelled financial products in Egypt, and the receivables bundled by Sarwa represent a range of different car manufacturers.

Indeed, the E£2.8bn issuance pool of receivables for Sarwa covered 12 different named brands of car, which was one measure of its diversity. Others included the physical location of the borrowers and the loan-to-value range across the pool.

The issue was split into three tranches. Tranche A, priced at Treasuries plus 0.6% (14.01% fixed coupon), was aimed at money market funds. Tranche B, at Treasuries plus 1.4% (14.81%), was targeted at banks, while tranche C, at Treasuries plus 1.9% (15.31%), was more popular with insurance companies and pension funds.

While the issuer is unrated, the A, B and C tranches were rated AA+, AA and A respectively by Middle East Rating & Investors Service (Meris). Bankers described this as the highest rating for a local, non-sovereign bond in Egypt. They said the issuer’s unrated status was mitigated by its experienced management team and strict adherence to its underwriting policies and procedures, assuring a high-quality receivables pool. Meris is monitoring the transaction on an ongoing basis and issuing regular performance reports.

At E£2.03bn, it was Sarwa’s largest ABS issue by some margin – together, all its issues since 2005 total only E£8.9bn. Thanks to the deal’s success, Sarwa followed up with a smaller transaction worth some E£1.8bn that was nonetheless Egypt’s second largest of the year.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter