Optimism high as PTA Bank floats five-year bond

PTA Bank, a regional development bank, floats a five-year bond today in the local market to raise 32.6bn/-for infrastructure development in the country.

The bond’s offer is expected to be closed in the next 10 days from the first day of offer. This is the second time the bank raise money through a note in the local market for the development activities.

Tanzania Securities acting Chief Executive Officer, Joseph Uiso, said he anticipated the bond will be received well despite liquidity tightness in the market.

“There is a liquidity challenge, but we anticipate a good turnout given the (PTA) bank reputation in the market,” Mr Uiso told the ‘Daily News’.

The acting CEO said “the first issuance was oversubscribed and we anticipate the same this time around.” Tanzania Securities and TIB Rasilimali are co-sponsoring brokers of the bond while fiscal agent and registrar is Stanbic Bank.

Mr Uiso said the bond proceeds are expected to finance development activities, but subjected to the approval of the PTA Bank. Such projects are infrastructure development which the bank sees fit to support. “All the money raised will be spent in the country,” Mr Uiso said.

The bond, according to the bank’s prospectus, is the first instalment—trenches, where interest will be paid in floating rate basis using six month Treasury bill and a set margin of 2.0 per cent.

The ‘Daily News’ understands that the bond initial primary market opens today (Wednesday) and closes on May 13 and thereafter will be listed at the Dar es Salaam Stock Exchange (DSE).

“Minimum amount to be raised in order for the issue to be considered successful is 16bn/-,” the document for indicative price shows. The bond full maturity is expected due in April 2020.

“The bank has also successfully issued local currency bonds in Tanzania, Kenya and Uganda, with the proceeds of the bonds being invested in the respective countries of issuance,” the prospectus shows.

PTA Bank’s primary source of funding is its share capital. Its subscribed capital as at end June 2014 stands at 1.43 billion US dollars of which 1.14 billion US dollars are callable.

A callable security is an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. The bank is a large financial institution with an asset base in excess of 2.85 billion US dollars as at June 2014.

The bank has 23 shareholders with shareholders’ funds to the tune of 522 million US dollars. EAC member states are among the bank’s shareholders.

PTA bank credit rating by Moody’s in 2013 was ‘Ba1’ indicating intrinsic financial strength and strong shareholder support and strong liquidity position, which is an important rating factor for multinational development banks.

Recently, Fitch upgraded the bank from BB-to BB supported their rating to strong liquidity due to the use of some bond proceeds to strengthen liquidity and improved credit quality due to reduction in non-performing loans.

Global Credit Rating Company gave the bank BB+ based on its capital base and a capital/assets ratio of 18 per cent. Each agency applies its own methodology in measuring creditworthiness and uses a specific rating scale to publish its ratings opinions.

The bank is an African development financial institution and is the financial arm of COMESA. Although the bank is a COMESA institution, its membership is open to non-COMESA states, non-regional countries as well as institutional shareholders.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
Share on Google Plus

About Abduel Elinaza

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.