Nico Agro plans to raise US$7m

The long-term paper, which opened yesterday, was arranged by Interfin Bank, as lead financial advisors. The issue will close at the end of this month.
The bills, with tenure of 365 days, are the first long-term paper after the Agriculture Marketing Authority’s agro-bills with a tenure of 360 days.
Just like the AMA bills, which were issued last month, they have also been issued with special features, which, traditionally, attract investors.
Special features of the bills include prescribed asset and liquid asset status. Liquid asset status means holders of the papers can borrow from the central bank overnight, while prescribed assets allow pension funds and insurance companies to invest in Government portfolios.
Interfin Bank are the guarantor of the bills which are supported by mortgage bond.
Nico Orgo and Interfin become the first corporates to come on the market to raise funding for the 2012/2013 agriculture season.
Government, through the AMA and CBZ Bank, were recently on the market to raise US$100 million to close funding gaps in the current agricultural season.
However, the bid suffered setbacks after the investors’ lukewarm response as the first batch of the bills raised a paltry US$17 million of the targeted US$50 million.
The results of the second issuance of US$50 million bills, which closed late last month, are yet to be announced.
Previous bills were undersubscribed as investors went for high interest rates, which the issuers were not prepared to pay, given the fact that they are long-term paper.
There has been a shortage of long-term paper on the market due to the persistent liquidity shortages. But upon the introduction of the desired long-term paper, it failed to find investor support.
Investors have been considering a number of issues, including the political and economic outlook to invest in the long-term paper.
Analysts say the long-term paper will continue to receive lukewarm response from investors as long as the liquidity situation does not improve. Investors prefer short-term investments with high interest rates.
The highest rate tendered for the recent 360-day bills was 19,75 percent and the lowest 10 percent, resulting in an average weighted rate of 11,27 percent for the amount allotted.
This is an indication of what the market wants and it shows that it is highly unlikely for bills to be fully subscribed.
Analysts said the trend by investors to ask for higher rates for the long-term paper is a reflection of serious liquidity shortages on the market.