10 year ESLA PLC bond struggles to raise targeted amount after initial extension

Lead managers of Ghana’s energy bond were not able to raise the entire amount targeted for the 10-year ESLA paper.

JOYBUSINESS understands that managers got GH¢2.79 billion worth of bids from investors, but accepted GH¢2.29 billion as against a target of GH¢3.6 billion.

The results showed that the amount raised for the 10-year ESLA paper was about GH¢1.4 billion short of what was targeted. The managers, according to sources accepted to pay investors an interest of 19.5 percent over the next ten years on the ESLA paper issued.

This will translate into about GH¢456 million being paid every year, however, the amount would reduce to GH¢312 million and GH¢156 million in the 9th and 10th year. 

This will result in the total interest and principal payment at the end of the bond at around GH¢7 billion.  

 7-year bond breakdown

Targeted: GH¢2.4 billion

Total Bids Tendered: GH¢2.52 billion

Bids Accepted: GH¢2.4 billion 

Final Clearing Yield: 19 percent 

This means government took GH¢2.4 billion at an interest of 19 percent and the settlement of these bids were be done on November 1 2017. 

The bond would mature on October 23, 2024, and E.S.L.A PLC the special company set up by the Finance Ministry would be paying an annual interest of GH¢456 million, resulting in total amount paying interest to investors at around GH¢2.7 billion, but GH¢5.1 billion in terms of total cost.

  10-year bond results  

Targeted Amount: GH¢3.6 billion

Total Bids Tendered: GH¢2.79billion

Amount Realized (Interim): GH¢2.29 million

Range of bids tendered- 19.00 -20.00 percent

Yield/Interest: 19.5 percent

This means government took ¢2.29 billion at an interest of 19. 5 percent and the settlement of these bids would be done on November 8, 2017. 

Did managers get all the 6 billion cedis targeted?

From the two bonds issued, managers secured GH¢4.6 billion in total for the GH¢6 billion targeted. Again if the expected interest to be paid on the bonds is put together, then that could cost the E.S.L.A PLC almost GH¢7 billion in interest payments, however, the warning here is that the amount could reduce when trading starts on the secondary market on the Ghana Stock Exchange. Investors are expected to make the necessary settle on November 8, 2017.

Why managers struggled?

A lot of reasons have been given for these challenging results.  Most market watchers have attributed it to the structure of the bond and the fact that it was not guaranteed by the government.

This is because most of these offshore investors who are “heavy” buyers of Ghana’s bond would only participate in papers that are guaranteed by the government.

The bond was arranged by Standard Chartered Bank and Fidelity Bank. It was supported by GCB and Temple investments.

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