Badex calls for public placement of $500million dollar Bond

By NANCY MWAPE
THE Bond and Derivatives Exchange Zambia Plc (BaDEx) has asked Government to consider a public placement for the issuance of the US$500 million sovereign bond to allow Zambian participation and test international appetite for the bond.
BaDEx is a public liability company that started operations in January 2012 focusing on bonds and derivates.
In an interview, BaDEx chief executive officer Dominic Kabanje said a public placement will show how large the targeted investor is as opposed to private placement.
A public placement is where a security is offered through the exchange to the whole market rather than to selected investors.
Mr Kabanje also urged Government to invite stakeholders for a briefing as a sign of good governance.
“Instead of a private placement, we propose that a public placement be undertaken for the primary listing…transparency in the bond issuance process is vital and prior to the public placement, the Ministry of Finance should set up a public website with all information and statistics on the issuance,” Mr Kabanje said.
He said the bond should be available on the site for the public to follow its progress.
Mr Kabanje said multiple listings should be done on BaDEx, JSE in South Africa, London Stock Exchange in the United Kingdom (UK) and New York Stock Exchange in the United States.
Mr Kabanje said from the US$500 million, a quarter of the offering should be reserved for Zambians and the rest shared in the regional market, European market and the United States (US).
He said Zambia should learn from other countries within the region such as Nigeria, which recently issued US$500 million bond.
For joint lead managers, Mr Kabanje suggested that the country engages one regional manager from the BRICS (Brazil, Russia, India, China or South Africa) and one from either the UK or US.
“This move will lead to diversification in the target investor base. We need a proper balance in the target investor group because it determines whether the market for sovereign bonds is an issuers’ market or an investors’ market,” he said.
He said the Securities and Exchange Commission and BaDEx can be the financial advisors, while the central bank can take up the position of being a paying agent.
He said for the legal advisors, local firms should be part of the service providers of the bond.
He said Government will require a domestic financial advisor to ensure that the country gets the best deal in terms of the interest payable and duration on this sovereign bond.
Mr Kabanje supported Government’s effort to issue the sovereign bond saying it will position Zambia as a growth area and highlight the economic potential to the international community.
He said with the favourable credit rating, a good benchmark is being set for future borrowings on international bond markets.
“This should lead to an inflow of foreign direct investment in the country. We hope this financial capital will be channelled to productive sectors of the economy and part of it used to redeem some of our shares in the mining sector,” he said.