The Africa Finance Corporation has secured a 500-million-dollar hybrid bond. The debut hybrid bond issue is expected to finance transformative infrastructure projects across the continent. Banji Fehintola, Executive Board Member and Head, Financial Services at AFC joins CNBC Africa for this discussion.
Now, the Africa Finance Corporation has secured a 500-million-dollar hybrid bond. Now, the debut hybrid bond issue is expected to finance transformative infrastructure projects across the continent. Banji Fehintola, Executive Board Member and Head, Financial Services at AFC joins me virtually for more on this discussion. Thank you so much for joining us on the show today, Mr Fehintola. Now, this marks the latest transaction we have seen from the desk of the AFC, reflecting the growing confidence we also see in hybrid bonds as a financial tool for multilateral development banks. But walk us through the details of the subscription volumes we've seen here, the lead managers of this particular issuance and what the proceeds will be used for. Well, thank you very much for having me on the show today. And yes, we just issued the hybrid bond. It was issued at a size of 500 million dollars, which, again, in the international bond market, that's considered to be benchmark. It's a transaction that we worked on, obviously, for a long time. Like you rightly said, this is highly successful. We had a group of banks that worked with us, you know, including the likes of, you know, MUFG, JP Morgan, you know, Bank of America, Emirates, MBD, Mashreq and Society General. The bond was placed in 144 era, I guess, format, which meant that it was distributable to global investors, including in the US. And it was highly successful. You know, we did marketing, met tons of investors, because it's a niche instrument. I mean, there was a lot of investor education that had to go into, you know, the marketing, and eventually, you know, it was placed well subscribed. At the end of the day, it was about 150% oversubscribed. And I think, for us, that's a resounding success, being the second one, you know, being done out of Africa. Use of proceeds, general corporate purpose. As you know, AFC is primarily into infrastructure finance. We were set up to help Africa to industrialize and to breach, you know, the infrastructure deficit. So we have a pipeline of transactions that we're going to be funding out of this bond proceeds. So these are transactions that cut across, you know, all the countries in Africa. So it's really going to be a busy time for all of us at AFC. And talking about the sort of pipeline of projects you're already working on, we know that of the Lobito Corridor Rail project, we also have the Red Sea Power Project, and even the Arise integrated industrial projects. But you talked about the pipeline of projects, I'd like you to speak to the to the specifics in terms of the deployment here. It's a lot. I mean, we, we are seeing transactions from all over. You mentioned some of them. And I think those ones you mentioned are pretty important. Lobito, particularly, is potentially going to be, you know, one of the biggest pieces of infrastructure play on the continent of Africa for a very long time. And in that project, we are the lead developer for that project, again, working closely with the United States and the European Commission, the government of Italy. And of course, that's a piece of infrastructure that cuts across several countries, you know, from Angola, to DRC, Zambia, and eventually could even extend down to Tanzania and co. And just, you know, imagine if a rail project was to come, you know, to fruition, that connects, potentially connects the Atlantic Ocean, you know, to the Indian Ocean, that's how big that project is going to be, is going to unlock a lot of, you know, transportation for critical minerals, and a lot of value addition on the continent. So that's an important piece of infrastructure that we're working on. In addition to that, as you did mention, you know, we're involved in Arise, and Arise has been one of our investing companies for a couple of years. Arise is expanding, Arise is potentially in 10, 11 countries. That's a lot of investment that we need to make in order to support the growth of Arise as a platform, as well as the industrialization strategy that they have. We're similarly very active in the renewable energy space. I'm sure you probably are aware that we are Africa's largest owners of renewable energy assets. So again, that's a platform that will be growing over time. We're working on a couple of projects in Stockholm, for example, which, you know, will produce renewable energy, and, you know, export that potentially to the UK, and supply up to 8% of the UK's energy need. So I think across board, you know, there's a lot of investments that we're making. The hybrid bond provides additional firepower for us to be able to raise more financing. We have a limit of three to one. So on the back of that equity kind of recognition that we get from the hybrid, we can actually lever up and do more investment. Yes, and talking about doing more investment, I'd like to also have your take on near term plans as well. When you were looking at opening up the funding sources and the sort of financing instruments that you'll be taking on, especially on the back of the recent AAA rating we have from S&P. Definitely, this is a stamp of approval, also solidifying AFC's capital position. What should we expect even further? So we're very excited about the AAA rating that we got. We got two of them out of China, one with CCXI, and the other one with S&P China. And obviously for us, that's an endorsement of the strength of our credit. And it just shows how well-governed and well-run an institution like AFC is. The reason why we did it, obviously, is because we're looking at that market. It's a deep market. The China bond market is quite deep. We are potentially looking at accessing that market at some point and in some shape that could potentially be through a Panda bond issuance, which we haven't done in the past, but we're considering. And I think generally speaking, we think the capital markets are supportive of very good credits like AFC. And for us, diversifying our funding sources is extremely important. So China is important. The rest of Asia is important. So we're looking at Japan, we're looking at Korea, we're looking at the Middle East and several other funding buckets as long as we get the right funding costs, and we get the right partners to partner with us in order to fulfill our mission. Banju, thanks a lot for your time on the show today. That was Banju Fetola, Executive Board Member and Head of Financial Services at Africa Finance Corporation.
Theme: Securing Funding for Critical Infrastructure Projects in Africa
The Africa Finance Corporation (AFC) has successfully secured a $500 million hybrid bond in its debut issuance. The bond is expected to finance transformative infrastructure projects across the continent, marking a significant milestone for the AFC. Banji Fehintola, Executive Board Member and Head of Financial Services at AFC, discussed the details of this transaction in a recent interview with CNBC Africa. The hybrid bond issuance, valued at $500 million, was considered a benchmark in the international bond market. The transaction was the result of extensive collaboration with leading banks such as MUFG, JP Morgan, Bank of America, Emirates, MBD, Mashreq, and Societe Generale. The bond was well-received by global investors, with a subscription volume exceeding expectations by 150%. This success demonstrates a growing confidence in hybrid bonds as a financial tool for multilateral development banks. The proceeds from the bond issuance will be utilized for general corporate purposes, focusing primarily on infrastructure finance. AFC, established to support Africa's industrialization and bridge the infrastructure deficit, has a robust pipeline of projects lined up for funding. These projects span across various countries in Africa and signify a busy period ahead for the AFC team. One of the key projects in the AFC's portfolio is the Lobito Corridor Rail project, a significant infrastructure initiative with the potential to connect the Atlantic Ocean to the Indian Ocean. This project, developed in collaboration with the United States, the European Commission, and the government of Italy, is expected to have far-reaching impacts on transportation and value addition for critical minerals across several African countries. Additionally, AFC is actively involved in the Arise integrated industrial projects, aimed at supporting industrialization strategies in multiple African nations. The corporation is also a major player in the renewable energy sector, owning significant renewable energy assets in Africa. Projects in the renewable energy space, such as those in Stockholm, have the potential to supply a substantial portion of the UK's energy needs. The successful issuance of the hybrid bond not only provides additional financial capacity for AFC but also enables leveraging opportunities for further investments. With a favorable AAA rating from S&P, AFC's capital position is solidified, enhancing its credibility and opening up new avenues for funding sources. The corporation is exploring various financing instruments and markets, including potential access to the deep China bond market through Panda bond issuance, to diversify its funding sources and ensure cost-effective financing for its mission. In conclusion, the AFC's $500 million hybrid bond issuance marks a significant step towards funding critical infrastructure projects across Africa. The corporation's strategic approach to diversifying funding sources and leveraging financial instruments underscores its commitment to driving sustainable development and economic growth on the continent.
"The successful issuance of the hybrid bond not only provides additional financial capacity for AFC but also enables leveraging opportunities for further investments."
Africa Finance Corporation, AFC, Banji Fehintola, hybrid bond, infrastructure projects, investment, financing, AAA rating, S&P, China bond market, Panda bond issuance, renewable energy, Lobito Corridor Rail project, Arise integrated industrial projects.