Second AfDB bond oversubscribed

Jun 09, 2013

THE African Development Bank (AfDB) recently listed its second two-year sh12.5b bond to fund strategic projects in Uganda. The bond was oversubscribed by 55%

By Samuel Sanya

THE African Development Bank (AfDB) recently listed its second two-year sh12.5b bond to fund strategic projects in Uganda.

The bond was oversubscribed by 55% as the appetite for debt instruments remains high in Uganda’s markets.

Unlike the traditional treasury bond auctions, the minimum bid amount for the AfDB paper is much higher at sh200m, way above the usual sh100,000 minimum for retail investors.

Dan Edoma of the African Alliance securities noted that a sizeable number of high-net worth retail investors participated in the second sh12.5b bond issue.

Also, unlike the Treasury bonds, the AfDB bonds are exempted from paying withholding tax, and investors will take their earnings without incurring taxes. The bonds have been pegged at 85% the interest rate on two-year Treasury instruments.

The current issue has an annual interest of 11% with the initial instrument at an interest of 12.5%. This is the first time the AfDB is issuing a local bond in Africa outside South Africa.

The bank also has plans to issue similar debt instruments to capital markets in 15 other African countries. There have been previous note issues in other African currencies and on the Euro market.

Investors can be settled in the local currency or US dollars or other hard currencies at maturity of the instruments.
Investors looking to buy into the issue can still do so on the secondary market.

Umeme dominated proceedings on the share markets at the close of business on Tuesday, with a turnover of sh122m from the sale of 355,106 shares at sh345 per share. Umeme’s share price has declined from sh370 in recent weeks.

The dfcu counter recorded zero trades on the day despite posting outstanding bids for 20,000 shares at sh1,030 per share. The merger with Dutch bank Rabo has increased demand, with supply remaining modest.

Bank of Baroda raked in sh65m from the sale of 500,000 shares at sh130 per share. Some 57,295 shares were still available for the taking.

Stanbic Bank (SBU) had the third highest turnover at 9.3m from the sale of 367,780 shares. Its share price briefly declined from its trading highs of sh30 going back to sh25.

There were outstanding bids for 21.5 million shares against 9.8 million shares in the outstanding offers compartment as supply struggles to keep up with demand.

Uganda’s leading daily, the New Vision raked in sh2.6m from the sale of 4,378 shares at sh600 per share, while National Insurance Corporation sold a modest 4,197 shares for sh146,895 turnover.

Total turnover was sh199.4b with the All-share index marginally falling to sh1,671.29, from sh1,676.44 mainly on account of cross listed companies.

On the other hand, the Local Share Index went up to sh228, from sh251.

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