Following weeks of marketing of the ESLA backed energy bonds, E.S.L.A. PLC, sponsored by the Ministry of Finance and administered by KPMG, successfully closed one of the largest local currency corporate bond issuances on Friday 27th October 2017.
This Landmark transaction sets a precedent in Sub Sahara Africa for public sector/SOEs debt restructuring and provides a clear and structured framework for the resolution of legacy debts owed by SOEs within Ghana’s energy sector.
The bonds which were issued as the first tranche of up to GHS6 billion under a GHS10 billion ESLA bond programme, comprised of bonds with tenures of 7-years and 10-years. Of particular significance is the level of enthusiasm domestic investors exhibited towards the 7-year bond, pushing total bids in excess of the GHS2.4 billion target. As such the 7-year was oversubscribed and closed on Friday, 27th October, priced at 19% (yield).
The pricing of the ESLA bond was very tight and compares favorably with recent past domestic sovereign transactions. The 7-year bond, is priced at a spread of 120bps above the current yield on the 7-Year local currency government bond issued in April 2017. It is also instructive to note that compared to the 5 Year VRA Restructured Loan Facility done in 2016 at a coupon of 22%, the 7 year ESLA Bond was priced at a discount of 300bps to it.
Whilst there was significant investor inquiry on the 10-Year bond, ESLA noted that there was a distinct impression that investors, especially international investors, required more time to study and appreciate the structure of ESLA PLC and the structure of the programme itself. Consequently, the 10 year bond auction will be extended by one more week and will close on Friday, 3rd November 2017.
The bonds which will be listed on the Ghana Stock Exchange (GSE), to provide investors with another tradeable asset class and will be of a size that ESLA expects will ensure active secondary market activity and liquidity.
The Energy Debt Recovery levy flows, a subset of the ESLA levies that have been assigned to E.S.L.A. Plc will be utilised to support debt repayment. The EDR levy receipts which have been assigned to E.S.L.A Plc are expected to service the ESLA bonds. Flows from this levy currently amount to approximately GHS 1.28 billion per annum and are expected to grow over time. Bond holders will be paid from EDR levy receipts assigned to E.S.L.A Plc.
The initiative is expected to help resolve some of the high levels of non-Performing loans within the banking sector and provide improved liquidity to the banks.
For the first time in Ghana, local investor participation significantly exceeded foreign participation, signalling local investor appetite for local currency corporate and government bonds.
Source: E.S.L.A Plc
