The Deals of the Year 2018 winners from Africa.

Bonds: Corporate 

WINNER: Sibanye Gold’s $1.05bn bond 

Global coordinators: Barclays, Citi, HSBC

Bookrunners: Credit Suisse, Standard Bank

Sibanye Gold’s $1.05bn bond was the largest private sector corporate bond debut ever out of both South Africa and Africa. It was notable not only for its size but also that it was achieved against such a difficult backdrop.

Sibanye is South Africa’s largest gold producer but, as a relatively recent spinout, had never issued bonds before. Political and labour uncertainties at home made it keen to diversify abroad, and in 2017 it completed a $2.7bn takeover of US platinum producer Stillwater. The deal was funded by a $2.7bn bridge facility, and the bond proceeds were needed to part-refinance this. 

The timing was awkward, however. The gold price had been falling and the South African government had just announced the introduction of a new mining charter, which decreed that black shareholders should own at least 30% of local mining companies.

A successful $1bn rights issue took place in May 2017, immediately after the acquisition had closed. A UK and US roadshow for the bond issue followed in early June, at the end of which the mining charter was unveiled. After a global investor call for investors to discuss the implications of the charter, Sibanye launched a dual-tranche offering with two-day execution.  

Initial price thoughts on a $500m five-year non-call two tranche were in the 6.5% area, with 7.5% for a $500m eight-year non-call four piece. Following a positive response, guidance was tightened to 6.375% to 6.5% and 7.375% to 7.5%, respectively. 

With books two times oversubscribed, the deal was priced at the tight end of guidance, at 6.375% and 7.375%, and the eight-year tranche was upsized to $550m. The notes were sold primarily to asset managers in what was the first South African bond debut for more than two-and-a-half years.

Bonds: SSA 

WINNER: Côte d’Ivoire’s $2bn-equivalent dual-tranche Eurobond 

Financial adviser: Rothschild

Bookrunners: BNP Paribas, Deutsche Bank, JPMorgan, Natixis, Standard Chartered Bank

Côte d’Ivoire successfully issued the first euro-denominated bond out of sub-Saharan Africa (excluding South Africa), alongside the region’s longest dated US dollar deal, which was nonetheless keenly priced.

Because Côte d’Ivoire’s currency, the West African CFA franc, is pegged to the euro, the sovereign can issue in euro without foreign exchange risk. As the leading economy of the West African Economic and Monetary Union (and the third fastest growing economy in the world), it was fitting that it became the first regional sovereign to take advantage of this helpful feature.

The government was seeking to raise funds for National Development Plan infrastructure, transport, energy and sanitation projects. At the same time, it wished to conduct a liability management exercise, buying back existing 2024 and 2032 notes. 

It began by offering to buy up to $750m of these notes, while announcing its intention to issue new notes denominated in both dollars and euros. Rothschild Global Advisory was sole financial adviser, with BNP Paribas, Deutsche Bank, JPMorgan, Natixis and Standard Chartered as joint bookrunners.

After a roadshow visited France, Germany, the UK and the US, existing notes worth $1.275bn, or 40% of the outstanding amount, were tendered. 

The issuer had been looking to raise separate amounts of $1bn and Ä500m. Demand was exceptional, however, with order books totalling $4.8bn and Ä4.5bn, respectively. The transaction sizes were increased to $1.25bn for a 15-year bond with a 6.125% coupon and Ä625m of eight-year notes paying 5.125%. It is understood that the dollar deal represented the lowest ever maturity-adjusted cost for a long-dated hard currency bond from a non-investment-grade sub-Saharan sovereign.

Bonds: FIG 

WINNER: Zenith Bank’s $500m Eurobond 

Joint bookrunners: Citi, Goldman Sachs

After a two-year hiatus, when access to international debt capital markets was all but impossible for them, Nigerian issuers are back. Banks have led the way, Zenith Bank being a notable case in point.

Economic crisis, compounded by low oil prices and currency controls, caused a two-year suspension of issuance from Nigeria between 2014 and 2016. Access Bank, the country’s fourth biggest lender, ended the drought with a $300m bond in October 2016.

The sovereign returned in February 2017 with a $1bn issue, to be followed by several other Nigerian banks. Perhaps the most eye-catching was Zenith, the country’s largest bank by Tier 1 capital, which came back to market in May 2017 after a three-year absence.

This was the first private sector financial institutions group deal out of Nigeria and sub-Saharan Africa in 2017, and went ahead despite some emerging markets volatility. 

After a benchmark deal was announced, the bank’s CEO and chief financial officer led a roadshow to London, Boston, New York and Los Angeles. Initial price thoughts were set at ‘high 7%s’. A steady inflow of orders allowed bookrunners Citi and Goldman Sachs to revise pricing levels to the 7.625% area, which did not deter investors, who finally placed orders worth $1.97bn. This included several large US accounts, and was the largest order book for any Nigerian private sector FIG issuer.

Pricing levels on a $500m transaction were tightened by another 25 basis points (bps), making about 50bps in all, to set the coupon at 7.375%. UK investors took 47% of the deal, followed by the US with 31% and the rest of Europe with 11%. A full 75% of investors were asset managers, with banks and private banks accounting for 11% and hedge funds for another 11%. 


WINNER: Barclays Africa’s R37.7bn accelerated bookbuild 

Global coordinators: Barclays, Citi

Bookrunners: BNP Paribas, Deutsche Bank, JPMorgan, Morgan Stanley, Société Générale, UBS

In South Africa’s largest ever equity deal in local currency, Barclays sold down the bulk of its remaining stake in Barclays Africa. Appetite for the stock was such that it could complete its disposal programme in one go, rather than in multiple transactions as originally planned.

In March 2016, Barclays had said it would sell down its 62.3% stake over the next two or three years to a level that permitted deconsolidation. Two months later, it reduced the stake to 50.1%, raising $879m. 

At the end of May 2017, Barclays launched a transaction to sell about 187 million Barclays Africa shares, 22% of the total. It had already confirmed the South African government-owned Public Investment Corporation as an anchor investor, taking 7%. The book was covered within 30 minutes of launch, and continued to grow rapidly.

The final order book was multiple times oversubscribed, allowing the deal to be upsized by more than 50%, to 285.7 million or 33.7% of Barclays Africa’s shares. The price of R132 ($11) a share represented a 5% discount on the previous close, and raised R37.7bn. The discount in the 2016 disposal had been 6.5%.

There was strong demand from existing shareholders and long-only funds. The top 20 investors took two-thirds of the transaction, which was skewed toward South African investors (44%), with strong demand from the UK (30%) and the US (21%).

Barclays says it plans to give 12.7 million shares to a black empowerment scheme, leaving it with a residual holding of about 15%. It estimates that when the stake is deconsolidated, it will result in a 73 basis points accretion to its common equity Tier 1 ratio, including the placing proceeds.

Green finance 

WINNER: Cape Town’s R1bn green bond 

Lead arranger: Rand Merchant Bank

Africa’s first accredited green bond was issued by the City of Cape Town, which is suffering the worst drought in its recorded history. The city promised to use the proceeds to fund water, sanitation and transport projects.

Ironically, given that it is due to run out of water this year, Cape Town has a solid environmental track record. In 2001, it became the first city in Africa to approve and adopt a comprehensive citywide environmental policy.

In July 2017, the city came to market with the first African green bond to be accredited by the Climate Bonds Initiative (CBI). A 10-year amortising instrument, this was also the first South African green bond certified by Moody’s as ‘GB1’, or ‘excellent’. 

The auction raised its target of R1bn ($83.4m) from eight allocated bidders, having received almost R4.9bn from 31 different bidders. The bond was priced at 133 basis points (bps) over the benchmark government bond, compared with guidance of 140bps to 160bps. Rand Merchant Bank (RMB) was lead arranger.

Among the water-related projects to be funded by the bond proceeds are a temporary offshore desalination plant, water pressure management, reservoir upgrades and a scheme for potable water from sewage.

The formal accreditation of green bonds is not a listing requirement in the South African bond market. However, in the wake of the Cape Town issue the Johannesburg Stock Exchange has launched a green bond segment, to provide a platform for companies to raise funds ring-fenced for low-carbon initiatives and for investors to invest in securities “that are truly green”.

RMB expressed the belief that, as the first accredited green bond in Africa, the Cape Town deal would set an example for others. In December 2017, the Nigerian sovereign duly issued a N10.7bn ($29.7m) five-year CBI-certified green bond. 

Leveraged finance 

WINNER: J&J Africa Transport’s $105m loan 

Arranger: Standard Bank

Standard Bank is proud of the way in which it supports Africa’s private equity sector, as it invests to drive growth in the continent’s key sectors. A $105m leveraged loan made from Mauritius and South Africa to logistics group J&J Africa Transport showed what it could do.

J&J was founded in Zimbabwe in 1996, and has grown to become a leading integrated logistics services provider in the southern and central African regions. With 1250 trucks, it engages in cross-border transport of agricultural and general merchandise, as well as warehousing and customs clearing. Its network covers eastern Democratic Republic of Congo, Malawi, Mozambique, South Africa, Zambia and Zimbabwe.

Private equity house Carlyle and Investec Asset Management became majority shareholders in J&J in 2014, acquiring a 54.3% stake. Carlyle’s interest is held by the $700m Carlyle Sub-Saharan Africa fund, which has a particular focus on Botswana, Ghana, Kenya, Mozambique, Nigeria, South Africa, Tanzania, Uganda and Zambia. The Investec holding is via its Africa Frontier Private Equity fund.

In 2017, Standard Bank provided a leveraged finance solution to J&J through its treasury company in Mauritius in the form of $105m in term facilities. These comprised a $52.5m five-year amortising term facility, and a $52.5m five-year bullet facility. They were used to refinance the balance of an existing facility, fund a dividend recapitalisation to provide pre-sale liquidity to the existing private equity shareholders, and finance capital expenditure. Standard Bank entities in Mozambique, South Africa and Mauritius collaborated to execute the transaction.

Infrastructure and project finance 

WINNER: Nacala Railway and Port Corridor 

Financial adviser to Vale and Mitsui: HSBC

Commercial lenders: ABSA, African Development Bank, Investec, Mizuho Bank, MUFG, Rand Merchant Bank, Standard Bank, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank

It took sub-Saharan Africa’s largest and most complex infrastructure financing to enable the $5bn Nacala Railway and Port Corridor project to go ahead. Ten banks, three export credit agencies and one development finance institution came on board to provide $2.73bn of debt.

The project involved the construction and rehabilitation of a 912-kilometre single railway line, linking Mozambique’s Moatize coal mine (owned by Vale of Brazil and Japan’s Mitsui & Co) with a new deep-sea export terminal at Nacala. While Nacala is on the Mozambique coast, the line passes through part of Malawi. 

Project benefits included the creation of a new freight and passenger corridor in Mozambique and Malawi, and reduced coal transport costs from mine to port. The railway will support other, mainly agricultural business along the corridor and create significant employment opportunities in an underdeveloped region. 

The line will have the capacity to support 6.6 pairs of trains per day and transport up to 22 million tonnes of coal a year. The concessionaires will also operate two pairs of trains a day for general cargo and one for passenger services. Construction began in December 2012 and was completed in 2017. 

Total 13.5-year debt funding of $2.73bn included $400m lent by South African banks and insured by Export Credit Insurance Corporation of South Africa; $1.03bn from Japan Bank for International Cooperation; $1bn lent by Japanese banks and insured by Nippon Export and Investment Insurance; and $300m from African Development Bank.

Bankers acknowledged the extreme complexity of the financing and paid tribute to the ‘huge effort’ across various parties to ensure that the funding was achieved. “It showcases global sponsors successfully delivering a project in sub-Saharan Africa,” said one, “further confirmation that Africa is open for business and investment.” 

Islamic finance 

WINNER: Nigeria government’s N100bn sukuk 

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

In 2017, the Nigerian government successfully issued its first sukuk, opening another window for raising funds to close the country’s infrastructure gap.

About half of Nigeria’s 180 million population are Muslim, so Islamic finance is a natural progression for the increasingly creative funding activities of the national Debt Management Office (DMO). In 2013, Nigeria’s Osun State was the first to test the Islamic market, issuing sukuk worth N10bn ($27.8m). The deal was oversubscribed, but there was no follow-up Islamic transaction at either national or state level – until 2017.

The DMO announced plans to issue a debut N100bn sukuk in the local market last June. It said this was part of the government’s plans to develop alternative funding sources and to establish a benchmark curve for corporates to follow. It would help the government to fast-track infrastructure development by engaging in ‘project-tied’ capital raising. In this instance, the funds would be used for the reconstruction or building of 25 roads across the country.

The seven-year instrument is structured as a lease and guaranteed by the government. The transaction was not launched until September, when it received N105.87bn in bids from retail and institutional investors, suggesting that the DMO may take this funding route again.

The national budget deficit has been aggravated by lower oil prices, which have reduced government revenues and weakened the naira. That has prompted the DMO to be more inventive in its funding tools. In June 2017, it raised $300m from its first diaspora bond, aimed at Nigerian expatriate retail investors. In November, the sovereign sold a N10.7bn certified green bond, the first African country (and only the fourth in the world) to do so.


WINNER: M-Kopa’s $55m loan 

Lead arranger and bookrunner: Standard Bank

Kenya’s M-Kopa, headquartered in Nairobi, provides solar home systems to off-grid customers on an affordable payment plan, and claims to be the global leader in ‘pay as you go’ energy. With the help of various Standard Bank units, it was able to raise the local currency equivalent of $55m in receivables-based financing.

Founded in 2010, M-Kopa combines mobile money payments with global system for mobile, or GSM, communication sensor technology to enable affordable consumer financing for solar-powered systems. So far, it has connected more than 500,000 east Africans to safe, clean energy. As a result, its customers can enjoy lighting, phone charging, radio and TV on daily mobile money payment plans that are lower than the typical cost of kerosene. 

M-Kopa’s Kenyan and Ugandan subsidiaries have borrowed the local currency equivalent of $40m and $15m, respectively, for four years, to fund the group’s expansion in its chosen markets. There is no risk mitigation, such as insurance or third-party guarantees.

Stanbic Bank Kenya structured the receivables-based financing deal, arranging the local currency loan from a consortium of lenders, including development finance institutions. Other Standard Bank units in South Africa, the Isle of Man and Uganda were instrumental in completing the transaction.

It was the largest commercial debt facility to date in the pay-as-you-go off-grid energy sector. Stanbic could bring together three development finance institutions to fund local currency facilities, when they typically only lend in major currencies. The Kenyan facility was arranged under the local interest rate cap regime on local currency facilities, which favours more established businesses. This funding will help M-Kopa to provide power to its target of 1 million customers in east Africa by 2020.


WINNER: Carlyle Group’s $872m acquisition of Shell Gabon 

Adviser to Shell: Citi

Private equity house Carlyle made one of its largest ever investments in Africa by buying Shell Gabon for a possible total of $872m. Citi was the sole mergers and acquisitions adviser to Shell on the deal.

The acquisition continues the current trend of private equity buying mature assets from big oil companies, knowing that they can squeeze just that little bit more out of them. After its £35bn ($49.7bn) takeover of BG Group, Shell promised to unload $30bn of assets by the end of 2018. The Shell Gabon divestment took its running total to about $20bn.

Shell Gabon produces about 41,000 net barrels of oil a day. The sale includes all of Shell’s onshore oil and gas operations and related infrastructure in Gabon, with five operated fields and participation interest in four non-operated fields. Carlyle saw off competition from Perenco, an independent European oil and gas company, to secure the deal.

The actual purchaser is Assala Energy, a Carlyle portfolio company. Capital for the investment will come from two Carlyle funds, one of which is the $2.5bn Carlyle International Energy Partners in its first significant investment. The other is the $698m Carlyle Sub-Saharan Africa fund, which invests in buyout and growth opportunities across Africa. 

Assala paid an initial equity consideration of $587m, and assumed a further $285m in debt. Another $150m payment will be contingent on the oil price and oil production. All 430 local Shell employees became part of Assala.

In one of the largest foreign direct investments into Gabon, Assala will focus on increasing margins by cutting costs, and boosting production and reserves with infill wells around existing operations, while Shell will concentrate on its upstream footprint, where it says it can be most competitive.


WINNER: Avesoro Resources’ debt restructuring 

Lead arrangers: Nedbank, Rand Merchant Bank 

When Aureus Mining ran into trouble with its New Liberty gold mine in Liberia, it lacked the liquidity to continue operations or to service its debt. Now, it is back in business, with a new shareholder, a restructure of its senior debt and a new name: Avesoro Resources.

The mine was opened in 2015, after its promoters had struggled with a civil war and an outbreak of Ebola. But it quickly ran into teething problems. 

Rand Merchant Bank (RMB) had $61m equivalent of exposure to Aureus, split between $49m of senior debt which benefited from credit and political risk insurance from South Africa’s Export Credit Insurance Corporation (ECIC), and $12m subordinated debt benefiting from Lloyd’s political risk insurance only. 

RMB believed there was a probability of accelerating the facilities, claiming against the ECIC policy and a potential loss under the subordinated debt. A search for new equity investment ended with MNG Gold becoming a 55% shareholder.

MNG Gold – owned by Turkish billionaire property developer Mehmet Nazif Günal – has mining operations in Turkey, Burkina Faso and Liberia. Mr Günal, who has wide-ranging interests in construction, tourism and finance, has since injected some $100m of fresh equity into the New Liberty mine.

The debt repayment profile has been restructured, providing more flexibility and time for the issues at the mine to be rectified and for cash flow to be generated. Under the new structure, all previously accrued interest and capital payments are repaid, and the repayment profile and covenant package are better suited to future cash flows. 

Importantly for the lender, the debt facilities, including the subordinated debt, now benefit from the personal guarantee of the majority shareholder as well as various corporate guarantees.

Securitisation and structured finance 

WINNER: Transsec 3 (RF)’s R2.5bn securitisation programme 

Co-arranger and sole bookrunner: Standard Bank

Minibus taxis are a way of life in South Africa and SA Taxi Finance Holdings has worked out how to assess credit risk accurately when lending to owners/drivers. Its Transsec vehicles have securitised the resulting auto loans, and the third in this series had a size of R2.5bn ($208.7m).

The minibus taxi industry accounts for 68% of all public transport trips to work in South Africa, and 70% of trips to school, university or other educational institutions, according to official figures. SA Taxi was founded in 1998 for the sole purpose of financing what it saw as the under-served small business market of minibus taxi operators. It sees itself playing a pivotal role in empowering black small, medium and micro-sized enterprises, and by 2017 had provided credit, insurance and allied products to more than 22,000 taxi operators.

Transsec, the first in the current series of ring-fenced securitisation vehicles, was a R4bn asset-backed note programme launched in 2014. The notes were rated by Standard & Poor’s and listed on the Johannesburg Stock Exchange. Transsec 2, another R4bn programme, was launched the following year.

Transsec 3’s smaller issuance amount was limited by the volume of available SA Taxi assets. This did, however, allow it to tighten spreads, all of which were tighter than guidance and within levels achieved in previous Transsec deals.

SA Taxi insists that each taxi it finances is fitted with a vehicle-tracking device. That, and its relationships with taxi associations, operators and commuters, gives it a unique insight into credit underwriting, it says. Key features of Transsec 3 include a more efficient capital structure, and a broader note offering that includes both term instruments (three- and five-year maturities) and money market instruments (less than one year).


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