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LISTED financial company NMB Bank managed to raise $4 million during the floatation of the first tranche of its two year $50 million mortgage-backed Small Medium Enterprises bond issue which opened during the last quarter of 2013.
According to the plan, NMB seeks to carry out the bond issue in five tranches of $10 million. The first $10 million tranche opened in October and closed in early December.
The bank’s managing director, Benefit Washaya said the institution intends to raise $50 million in the long run for Small to Medium Enterprises but the facility is drawn down on an “in-need basis”.
“This means that when the bank identifies deserving enterprises, we approach a select number of investors and raise the (required) funds. Therefore this is a private placement between NMB Bank and the identified investors.”
He added: “In the last quarter, after a careful analysis given the difficult trading environment in the country, we identified a number of qualifying small businesses and raised about $4 million for them.”
The earmarked SMEs should at the minimum have an asset base of between $10,000 to $2 million, employ five to 20 people and have an annual turnover of $30,000 to $5 million.
Facilities shall be availed for working capital, trade finance, asset financing, lease financing, order financing and capital expenditure. All loans created from the proceeds of the SME Bonds will be secured by the borrowers with immovable property.
“As a precondition for lending by NMB Bank, borrowers should show commitment to their projects and businesses by providing acceptable collateral in the form of property with ascertainable values, which will be ceded to the Trustee in terms of the Trust Deed.
“Lending rates and associated charges will be within the framework of the law or any other prevailing legislation or agreement such as the recently signed
“Memorandum of Understanding between the BAZ and the RBZ (and any amended, subsequent or successor Memoranda of Understanding). It should be highlighted that other charges such as insurance costs, property valuation, mortgage and bond registration fees that are not part of the Memorandum of Understanding will be passed to the borrowers in loan arrangements,” said the group.
Washaya said the bank would continue monitoring the trading environment and has lined up another tranche from investors for projects under consideration during this quarter.
The bonds are being issued in registered form, in denominations of $10,000 subject to a minimum subscription amount of $100,000. The bonds have an attractive 10,5 percent annual coupon rate payable quarterly. The principal is redeemed over two years, with one half being paid back to investors in year one and the remaining half in year two.
They also have been collateralised by urban properties (mortgage bonds held by Old Mutual Custodial Services on behalf of bond holders).
The bonds have been accorded prescribed asset status and as well as liquid asset status making them attractive assets on the portfolios of banks, insurance companies, provident and pension funds. — FinX.
Online Reporter