New Finance Bank (NFB) yesterday issued a K14 billion three-year corporate bond, the first to be listed on Malawi Stock Exchange (MSE), to raise money for the bank’s growing borrowers’ appetite.
NFB, which is a relatively new bank on the market, will issue the corporate bond—a debt instrument which an investor loans money to an entity and is issued to raise financing—at a coupon (interest) rate of 18 percent in three phases.
The first issue of K4 billion was listed on MSE yesterday while the remaining K10 billion will be listed in two equal phases of K5 billion next year and the following year.
NFB chief executive officer Zandile Shaba said the bank wants to increase its lending; hence, taking the long-term but cheaper route to raise the money.
“Our primary focus is on the small medium enterprises [SMEs] sector and we are lending to the SMEs a lot with regard to our existing loan book sector. We thus want to continue this going forward; hence, this move to raise more funds,” she said.
Shaba said for the past three years, the bank has been focusing on strengthening and meeting all compliance aspects.
NFB corporate bond comes a year after NBS Bank plc issued a K7 billion bond facility with the Roads Funds Administration (RFA) to finance the rehabilitation and construction of a dual-carriage way from Area 49 to Parliament in Lilongwe.
MSE chief executive officer John Kamanga said the bond gives investors a diversified opportunity in terms of products to access on the 13-counter MSE but also add depth in terms of liquidity.
“What it means is that the investors can invest in equity as well as on the treasury notes, but also one can invest in the corporate bond.
“This bond also makes the market liquid, thereby complementing the success of the market which is measured by the depth of liquidity,” he said.
The corporate bond coupon (interest) rate at 18 percent is relatively lower than bank interest rates but higher than the inflation rate at 8.9 percent, giving a good return on investment.
Stockbrokers Malawi Limited chief executive officer Noel Kadzakumanja said the bond gives NFB an upper hand to raise money in a cheaper way but also raise its profile by going public.
It remains to be seen if the bond will attract investors as bonds listed by government received lukewarm response from the investing public.
For instance, earlier this year, government listed bonds worth K28 billion to raise funds to service its debt, but they received lukewarm response, a situation analysts linked to nature of investors that the bonds were targeted for.
The NFB bond is co-lead arranged by MyBucks Corporate Finance Limited jointly with the Stockbrokers Malawi Limited who are also debt sponsors.
National Bank of Malawi plc is the transfer secretary, calculation agent and paying agent.