CELTEL KENYA KES 725 million partial credit guarantee to credit - - PowerPoint PPT Presentation

CELTEL KENYA

KES 725 million partial credit guarantee to credit enhance a local bond issue as part of a larger financing package for the second mobile telecommunications provider in Kenya.

Developmental Benefit

Celtel Kenya needed to restructure its balance sheet by exchanging costly foreign currency shareholder loans with local currency debt. This allowed the company to run a more capital-efficient and competitive business and expand its

Transaction Overview

Date: December 2005 Country: Kenya GuarantCo Guaranteed Amount: Kenya Shillings (KES) 725 million (USD 12 million) Total Transaction size: KES 3.5 billion Financing Partners: FMO, DEG and competitive business and expand its

• network. This helped to reduce tariffs,

thus making mobile services affordable to a greater proportion of the population. GuarantCo Additionality: As part of its initiative to maximise local currency financing, Celtel Kenya sought to raise Kenyan Shilling debt from the local capital market. However, in order to place debt in the local capital market, Celtel Kenya needed to obtain credit enhancement from an AAA-rated institution. GuarantCo’s involvement enabled FMO to arrange and underwrite the required credit enhancement for the debt issuance. The facility provided a major boost to the Kenyan capital market due to the demonstration effect of a private sector non-financial institution’s successful bond listing.

ALAF LIMITED

TZS 6.5 billion partial credit guarantee made available to provide credit enhancement for a bond issue to finance the expansion of a steel plant in Tanzania

Developmental Benefit

The Safal group is one of the biggest producers of steel roofing in Africa, widely used in affordable housing. The proposed investment in their Tanzanian plant introduced new and more affordable product lines, besides improving quality of

Transaction Overview

Date: June 2007 Country: Tanzania GuarantCo Guaranteed Amount: Tanzania Shillings (TZS) 6.5 billion (USD 5.1 million) Total Project Cost: TZS 37.3 billion Financing Partner: IFC product lines, besides improving quality of existing production, thus providing access to better quality housing products to low and middle income households. GuarantCo Additionality: The Safal Group proposed to partly fund its proposed new product line in Tanzania by local currency bonds, but needed credit enhancement to be able to access the local capital market. GuarantCo and IFC’s guarantee, covering 75% of the bond amount, was critical for Safal to begin the process of issuing the bonds. The guarantee was agreed by IFC and GuarantCo in 2007 but was not in the end required as Alaf eventually managed to access the bond market without credit enhancement in 2009. However, the availability of the guarantee played an important role in catalysing the investment 2 years earlier than would have otherwise been possible as Safal was prepared to inject its equity portion up front knowing the debt portion was secure. It is a feature of GCo’s support that no early penalties are charged for cancellation, thus encouraging clients to graduate to purely commercial finance at the earliest opportunity.

MABATI ROLLING MILLS

KES 750 million partial credit guarantee made available to provide credit enhancement for a bond issue to finance the expansion of a steel plant in Kenya

Developmental Benefit

The Safal group is one of the biggest producers of steel roofing in Africa, widely used in affordable housing. MRM is their flagship operation in E Africa. Demand for steel roofing has been growing, in line with the rapid growth in housing activity in

Transaction Overview

Date: June 2007 Country: Kenya GuarantCo Guaranteed Amount: Kenyan Shillings (KES) 750 million (USD 9.7 million) Total Project Cost: KES 3 billion Financing Partners: IFC with the rapid growth in housing activity in the region. The new capacity at Safal’s Kenya plant will enable them to meet the growing demand while continually improving product quality. GuarantCo Additionality: The Safal Group proposed to partly fund its proposed plant capacity expansion in Kenya by local currency bonds, but needed credit enhancement to be able to access the local capital market. GuarantCo and IFC’s guarantee, covering 75% of the bond amount, was critical for Safal to begin the process of issuing the bonds. The availability of the guarantee in 2007, while not eventually required, played an important role in catalysing the investment 18 months earlier than would have otherwise been possible. Safal’s access to Kenya’s domestic capital market without a guarantee, a significant and welcome sign of increased market sophistication, was facilitated by GuarantCo and IFC’s timely support. GuarantCo was then able to recycle its capacity for other projects in the region.

CELTEL CHAD

XAF 3.5 billion partial credit guarantee for Afriland Bank to provide additional lending to the leading mobile telecommunications provider in Chad

Developmental Benefit

The link between mobile phone use and development has been widely documented, particularly in Africa. The further network expansion, partially financed by the GuarantCo covered loan, has helped expand the network into more

Transaction Overview

Date: October 2007 Country: Chad GuarantCo Guaranteed Amount: CFA Franc (XAF) 3.5 billion (USD 8 million) Total Transaction size: XAF 14.8 billion Beneficiaries & Financing Partners: Afriland First Bank, FMO has helped expand the network into more rural areas. Celtel Chad leads the way in expanding the mobile network, so for many areas this will be the first time they have had access to a mobile services. In addition, the ability to roam over a larger proportion of the country is particularly useful for Chad as it has a significant nomadic population. GuarantCo Additionality: In line with Celtel policy to increase local currency financing, Celtel Chad sought additional CFA financing for capital expenditure and to refinance USD shareholder loans. The joint guarantee by FMO and GuarantCo enabled Afriland First Bank to increase its loan beyond its normal lending cap to meet Celtel Chad’s full debt requirements.

SHRIRAM I

INR 900 million partial credit guarantee of the mezzanine tranche of a truck finance receivables securitisation in India

Developmental Benefit

Shriram finances small truck

• wner-
• perators who would otherwise have to

borrow from unlicensed money lenders. The finance enables thousands of poor truck drivers to purchase their

• wn

vehicles rather than remaining employees.

Transaction Overview

Date: December 2008 Country: India GuarantCo Guaranteed Amount: INR 900m (USD 19 million) Total Transaction Size: INR 21 billion Beneficiaries & Financing Partners: Deutsche Bank, FMO The mezzanine guarantee was a product not available from Indian investors. This intervention enabled a much larger capital markets transaction to be completed without which Shriram would have reduced its support to the sector. The Shriram group is one of the corporate leaders in HIV awareness and reduction programmes. The Shriram Transport business is essential to the programmes, as the company has unrivalled access to truck drivers to run health and education programs. GuarantCo Additionality: Deutsche were seeking to syndicate an INR 2,036 million mezzanine tranche in a securitisation of truck finance receivables but were struggling as there was no investor appetite for mezzanine debt in India. GuarantCo, in collaboration with FMO, was able to guarantee the mezzanine tranche thereby enabling the successful securitisation. GuarantCo and FMO’s facility helped demonstrate the commercial viability of mezzanine guarantees in the nascent Indian securitisation market and today Shriram is able to get such guarantees from private sector

• banks. GuarantCo and FMO’s intervention helped this transition to more sophisticated financial products,

thus building additional capacity in the local capital markets

WATANIYA PALESTINE TELECOM

USD 10 million partial risk guarantee of two Palestinian banks lending to a start-up mobile telecommunications

• perator in the Palestinian Territories

Developmental Benefit

Mobile phone penetration in Gaza and the West Bank was a relatively low 29% in 2008 as the service was poor. WPT has introduced high quality communications services at affordable prices. Increased competition is expected to lead to lower

Transaction Overview

Date: January 2009 Region: Palestinian Territories, West Bank GuarantCo Guaranteed Amount: USD 10 million Total Project cost: USD 145 million Beneficiaries & Financing Partners: Bank of Palestine, Commercial Bank of Palestine competition is expected to lead to lower tariffs and reliable services for consumers which will reduce the cost

• f

doing business in all sectors. Given the restrictions on movement for Palestinians, good mobile telecommunications are even more critical for social and economic development than elsewhere. The single largest private sector investment in Palestine, WPT will demonstrate to other investors that the investment climate has improved and that

• ther infrastructure projects are possible.

GuarantCo Additionality: By providing a guarantee, GuarantCo enabled Wataniya Palestinian Telecom (“WPT”) to access USD 25m

• f financing from two local banks, the Bank of Palestine and Commercial Bank of Palestine. WPT was

keen to involve as much financial support from the Palestinian banking sector as possible. BoP and CBoP have substantial USD deposits (Palestine doesn’t have its own currency) and were enthusiastic to support this major investment. However local bank regulations limited the amount they could lend without a

• guarantee. Offshore financing also came from overseas lenders including IFC, Standard Bank and

Ericsson Credit (the latter two partially guaranteed by EKN, the export credit agency of Sweden)

CALCOM CEMENT

INR 1,120 million partial credit guarantee of two Indian banks’ lending to a new cement plant in Assam, India.

Developmental Benefit

The project will create the largest cement production facility in the North-East region

• f India which suffers from a chronic

cement production deficit. It will help bring down the abnormally high cement prices in the region by reducing the substantial

Transaction Overview

Date: September 2009 Country: India GuarantCo Guaranteed Amount: INR 1,120million (USD 25 million) Total Project Cost: INR 4,076 million Beneficiaries & Financing Partners: HDFC Bank, Axis Bank, Cordiant Capital in the region by reducing the substantial cost of freight that suppliers currently bear for cement brought in from mainland India. It is also the largest single private sector infrastructure investment in the North

• East. Besides providing employment and

increasing economic activity in the troubled region, the project will support

• ther

infrastructure projects such as housing, roads and hydropower thereby multiplying the developmental benefit. GuarantCo Additionality: Although the economic and security situation in the north-east region of India has vastly improved in the recent past, Indian banks are still cautious lending to projects in the region. HDFC Bank, the lead arranger, was struggling with syndication of the project debt. GuarantCo’s guarantee enabled the additional financing required for the project to achieve financial close. The amount required was above GuarantCo’s normal maximum exposure so INR 480m of the total INR 1,120m was syndicated by GuarantCo to Cordiant Capital, a Montreal based Emerging Market fund manager, thus leveraging in further private sector support.

ACKRUTI CITY LIMITED

INR 940 million partial credit guarantee for lending to several slum redevelopment projects in Mumbai, India.

Developmental Benefit

Nearly half

• f

Mumbai’s 15 million inhabitants live in slums. They have limited access to basic amenities like clean water and sanitation and have no security of tenure.

Transaction Overview

Date: November 2009 Country: India GuarantCo Guaranteed Amount: INR 940 million (out of initial financing of INR3.9 bn) Total Project Cost : INR 55 billion Beneficiaries & Financing Partners: Deutsche Bank, FMO, Cordiant Capital, ICF Debt Pool GuarantCo’s support is helping to re- house up to 30,000 families in small but permanent flats with access to clean water, sanitation, electricity and clear legal title. This will greatly improve living conditions and the life chances of children in particular. Unlike many schemes, the initiative is voluntary and community led. Such is the high value of land in Mumbai that developers are prepared to provide free, quality housing on the same site to slum communities, in exchange for permission to develop & sell part of the freed up land. GuarantCo Additionality: This 5 year project financing facility provides Ackruti City Limited with early stage funding that was not available from other sources. Most slums exist illegally on municipal land and thus banks approached by slum dwellers and developers are not able to receive pledge of the land as security. The process of acquiring ownership rights over the land is lengthy and not without risk. Ambiguity in the application of local regulations prohibiting acquisition of land further adds to the local banks discomfort. Frontier Markets Fund Managers played an active role in structuring the financing and GuarantCo’s partial credit guarantee enabled the facility to be increased by over 40%, thus helping it achieve critical size.

SHRIRAM II

INR 916m million partial credit guarantee of Tier II capital raising by Shriram

Developmental Benefit

Shriram finances small truck

• wner-
• perators who would otherwise have to

borrow from unlicensed money lenders. The finance enables thousands of poor truck drivers to purchase their

• wn

vehicles rather than remaining employees.

Transaction Overview

Date: September 2010 Country: India GuarantCo Guaranteed Amount: INR 916 million (USD 20 million) Total Transaction Size: INR 2,250 million Beneficiaries & Financing Partners: Deutsche Bank, FMO Shriram’s core business of commercial vehicle finance continues its strong growth. Shriram is also now seeking to expand its products to finance

• ther

small infrastructure equipment servicing India’s growing infrastructure requirements. GuarantCo Additionality: Shriram needs to continually raise additional capital in line with the rising demand for its truck loans. Deutsche Bank were seeking to syndicate INR 2,500 million of Tier II capital to allow Shriram to expand their financing operations. Such capital issues compete with higher yielding assets for scarce capital in India, making obtaining reasonably priced capital funds a challenge GuarantCo and FMO’s participation enabled Shriram to raise the capital at affordable rates which can be used to leverage much larger borrowings from commercial lenders

SOUTH AFRICAN FINANCE COMPANY

ZAR 139 million partial credit guarantee of the senior tranche

• f the Company’s loan program1

Developmental Benefit

The Company helps to finance a critical sector that employs and is utilised by the majority of South Africans. The Company has provided seed capital to at least 20,000 broad based black SMMEs (all of whom are previously disadvantaged

Transaction Overview

Date: September 2010 Country: South Africa G’tCo Guaranteed Amount: ZAR 139 million (USD 20 million) Total Transaction Size: ZAR 760 million Beneficiaries & Financing Partners: FMO, ICF Debt Pool and Investec Asset Management GuarantCo Additionality: whom are previously disadvantaged individuals). GuarantCo Additionality: An initial ZAR 760 million of a larger debt raising program was placed with commercial lenders and the DFI community. FMO were joint lead arrangers for the facility, which included ZAR 635 million of senior loans, with participations from GuarantCo, FMO and ICF, and a further ZAR 125 million of mezzanine financing provided by Investec Asset Management. South Africa, being an upper middle income country, would not normally qualify for support from

• GuarantCo. However, given the pro-poor nature of the financing and the company’s inability to access the

local markets following the financial crisis, GCo obtained special approval from its shareholders to support the financing

1 – Due to confidentiality reasons, certain details of this transaction have been withheld

HOME FINANCE GUARANTORS AFRICA

USD 5 million Stop-Loss Insurance for HFGA, who will reinsure Collateral Replacement Indemnities that facilitate access to home loans by low and lower middle income households

Developmental Benefit

Access to affordable home loans is a major

• bstacle

to economic development for most low and lower middle income families in developing

• countries. Many families are unable to

buy or improve a home because of limited access to finance. There is

Transaction Overview

Date: September 2010 Country: Ghana, Kenya, Rwanda, Uganda and Malawi G’tCo Guaranteed Amount: USD 5 million equivalent in local currencies Total Project Cost : N/A Beneficiaries & Financing Partners: HFGA, Home Loan Guarantee Company (HLGC), various local insurance companies limited access to finance. There is lender reluctance to enter this market due to the inability of borrowers to provide sufficient down-payments and resulting perceived default risk. At the same time, few developers choose to build low cost housing because there is no prospect

• f

potential buyers raising finance. HLGC’s business model has worked well in South Africa for 20 years and HFGA, with GCo’s help, aims to replicate this success in sub Saharan Africa. GuarantCo Additionality: HFGA is introducing innovative home loan protection products to new markets in conjunction with local insurance companies in order to stimulate local banks to widen access to finance. HLGC, who has set up HFGA based on their successful South African model, is a not for profit social enterprise and has not accumulated sufficient reserves to fully capitalise HFGA. HFGA therefore faced difficulty meeting regulators’ minimum capital requirements without backing from GuarantCo. Given the pioneering nature of HFGA’s work, such backing is not available from either commercial insurers or even dfi’s. The initial USD 5m facility may be increased depending on demand. Additional technical assistance funds are being used for a capacity building programme with local insurers and banks and to help provide financial literacy training for borrowers. An output based aid programme is also being considered that will provide targeted subsidies to make Collateral Replacement Indemnities affordable to the lowest income quartile of households.

SPENCON

USD 15 million performance bond guarantee facility for a local east African construction company

Developmental Benefit

Performance Bonds are a prerequisite for carrying out any construction project in Africa and they are the most significant financial bottleneck for the company. Large construction contracts, often donor funded, are regularly

Transaction Overview

Date: October 2010 Country: Uganda, Kenya, Tanzania G’tCo Guaranteed Amount: USD 15 million equivalent in local currencies Total Transaction size : USD 30 million equivalent in local currencies Beneficiaries & Financing Partners: Standard Chartered Bank contracts, often donor funded, are regularly awarded to international construction companies, at 15 – 25% higher prices, because local companies cannot furnish the full performance bonds required. GuarantCo’s facility will help lower the cost of infrastructure in the target countries by enabling greater competition and local private sector

• participation. There will be continued expansion

and employment for

• ver

800 permanent Spencon staff and over 3,700 semi skilled personnel across East Africa. GuarantCo Additionality: Spencon is a mid sized local civil works contractor headquartered in Nairobi specialising in the water, roads and power sectors. They were having trouble obtaining additional performance bond lines from their banks in order to bid for and execute projects in East Africa. Standard Chartered, their main banker, was unable to provide the full requirement of USD 30 million, largely due to bank regulations on single obligor limits. GuarantCo’s guarantee made it possible for Standard Chartered to offer the full additional facility required.

KUMAR URBAN DEVELOPMENT LTD

INR 920 million partial credit guarantee to help finance the largest slum redevelopment project in Pune, India

Developmental Benefit

Like most major Indian cities, a large proportion

• f

Pune’s population lives in

• slums. They have no security of tenure and

have limited access to basic amenities like clean water and sanitation.

Transaction Overview

Date: March 2011 Country: India GuarantCo Guaranteed Amount: INR 920 million (out of initial financing of INR 2.5bn) Total Project Cost : INR 24 bn Beneficiaries & Financing Partners: Deutsche Bank, FMO clean water and sanitation. GuarantCo’s support is helping to re-house more than 5,000 families in small but permanent flats. These are provided for free

• n the same site by KUDL in anticipation of

profits from development & sale of freed up land. The flats will have clean water, sanitation, electricity and clear legal title, which will greatly improve living conditions and the life chances of children in particular. Tenants are helped to set up housing societies to take

• ver

the running and maintenance of their new buildings with an endowment from KUDL. GuarantCo Additionality: Following the success of the slum redevelopment scheme in Mumbai, the state government decided to extend the scheme to other cities in the state, including Pune, a neighbouring city of Mumbai. KUDL’s project is the first large scale slum redevelopment project under the scheme in Pune. Commercial slum redevelopment projects typically require only initial seed funding, after which they are self financing from the stage payments made by buyers of the commercial property element. However, local banks avoid this seed funding i) discouraged by central bank regulators from lending for property development and ii) put off by the complex social and environmental issues involved with slum re-

• housing. The absence of a track record of successfully implemented projects in Pune made it even

tougher for the pioneering KUDL project to raise financing. Given the lack of funding, KUDL began implementation of the project from their own resources, completing only 10% of the project in the first 3 years. The 5 year project financing facility provided by GuarantCo, DB & FMO will allow KUDL to complete the balance rehabilitation in the next 3 years

TOWER ALUMINIUM GROUP LIMITED

Partial credit guarantees totalling NGN 2.21 billion to credit enhance the maiden bond issue of the largest manufacturer of aluminium roofing in West Africa

Developmental Benefit

GuarantCo’s support for Tower has had a strong demonstration effect, helping build further capacity in the embryonic Nigerian capital markets. It has also stretched the tenor to 7 years from the typical 5 years for previous corporate bonds, which is a crucial

Transaction Overview

Date: September 2011 Country: Nigeria G’tCo Guaranteed Amount: NGN 2.21 Billion (USD 14.7 million equivalent) Total bond issue : NGN 4.63 Billion (Tranche A: NGN 3.63 Billion and Tranche B: NGN 1 Billion) Beneficiaries & Financing Partners: First Trustees Limited (on behalf of investors) GuarantCo Additionality: previous corporate bonds, which is a crucial step toward meeting the requirements of future infrastructure related bond issues where longer tenor is essential. Following a request for assistance, GuarantCo is also working with the Nigerian Securities & Exchange Commission to set up training and mentoring of their staff. Tower produces aluminium roofing, a component of low cost housing. It offers advantages over steel roofing, lasting 5 times longer, at prices affordable to low income families in Nigeria and other parts of West Africa GuarantCo Additionality: In 2008 Tower Aluminium Group Limited (“Tower”), the largest manufacturer of aluminium roofing in West Africa, financed a new factory with USD denominated bank loans. In late 2008, as the full impact of the global financial crisis hit Nigeria, the Naira devalued by c 25% against the USD. Tower’s revenues are mostly in Naira and the impact of the devaluation was to significantly increase the cost of servicing its USD financial liabilities. The viability of the expanded business was thus impacted severely. Tower recognised the need to diversify away from relying on the bank market and decided to refinance its USD liabilities by issuing a 7 year Naira denominated corporate bond, thus enabling the company to also reduce its currency risk and extend the tenor of its debt. Tower was however unable to secure the “A” local rating required to be able to access local pension funds, key investors in the Nigerian corporate bond

• market. GuarantCo was able to use its local AAA rating in Nigeria to credit enhance Tower’s bond issue,

thereby making it eligible for pension fund investors. This was the first time such a structure had been used in Nigeria and there were many regulatory and procedural challenges which could not have been

• vercome without GuarantCo’s patient developmental approach.

KALANGALA INFRASTRUCTURE SERVICES

Joint partial credit guarantee totalling USD 2.2 million covering part of the financing for two new ferries, a road rehabilitation and certain water facilities for Bugala Island in Lake Victoria, Uganda

Developmental Benefit

The enhanced infrastructure is required in

• rder to satisfy the growing and unmet

demand and will be transformative for Bugala Island. It is highly unlikely that the existing dilapidated and unsafe ferry would

Transaction Overview

Date: December 2011 Country: Uganda G’tCo Guaranteed Amount: USD 1.8 million Total note issue : USD12 million (guaranteed tranche USD 5 million) Beneficiaries & Financing Partners: Nedbank Limited, EAIF and USAID (as co-guarantor) GuarantCo Additionality: existing dilapidated and unsafe ferry would have been replaced in the foreseeable future, nor the water supply systems

• installed. In addition, the ability for the

project to support the water supply systems is due to the project’s multi-revenue streams, diversification and economies of scale and scope provided by other aspects

• f the project. As a stand-alone project,

these water schemes are highly challenging to finance and operate. GuarantCo Additionality: This is a highly developmental project to bring basic utilities to the largest island in Lake Victoria and has required imaginative financing to attract the debt required to meet the challenging economics. GuarantCo played a crucial role over a five year period in underwriting (at times for substantially larger amounts), structuring and executing the finance. This is the first time that GuarantCo has provided a joint guarantee with USAID and the first time that Nedbank has been the beneficiary of a guarantee from GuarantCo. In particular, GuarantCo worked closely with USAID to amend their standard form documentation in order to align it more appropriately with a project financed structure. The Kalangala Infrastructure Services project consists of the ownership, financing, upgrade, construction,

• peration and maintenance of two roll-on roll-off passenger and vehicle ferries, the upgrade of the island’s

66km main road from a dirt road to a gravel road, and a series of solar-powered pump based water supply systems, in each case to serve the population, institutions and businesses of the Island. This project is part

• f an integrated project with Kalangala Renewables.

KALANGALA RENEWABLES

Joint partial credit guarantee totalling USD 1.4 million covering part of the financing for a hybrid solar generation system and associated transmission and distribution systems for Bugala Island in Lake Victoria, Uganda

Developmental Benefit

At present there is no operational grid-based electricity supply on Bugala Island with most

• f the population, schools, institutions and

businesses on the Island lacking access to reliable and affordable electricity. The

Transaction Overview

Date: December 2011 Country: Uganda G’tCo Guaranteed Amount: USD 1 million Total note issue : USD12 million (guaranteed tranche USD 5 million) Beneficiaries & Financing Partners: Nedbank Limited, EAIF and USAID (as co-guarantor) GuarantCo Additionality: extension of daytime activities, such as studying, will add to the Island’s productivity and education. More specifically, anticipated improvements include the following:

• Decrease in energy costs per kwh
• Access to more employment opportunities
• Improved literacy due to improved lighting
• Reduced time spent on collecting fuel
• Better healthcare through improved

medications and sanitation measures

• Improved ability to preserve and market

agricultural products

• Improved marketing of the island as a

tourist destination thereby helping to diversify the Island’s economy. GuarantCo Additionality: GuarantCo played a crucial role over a five year period in underwriting (at times for substantially larger amounts), structuring and executing the finance. This is the first time that GuarantCo has provided a joint guarantee with USAID and the first time that Nedbank has been the beneficiary of a guarantee from

• GuarantCo. In particular, GuarantCo worked closely with USAID to amend their standard form

documentation in order to align it more appropriately with a project financed structure. Kalangala Renewables consists of a 1.6 MW (nominal) hybrid solar and diesel power generation system, 33kv transmission system, low voltage distribution system and the installation of a prepaid metering system to households and businesses on the Island. This project is part of an integrated project with Kalangala Infrastructure Services.