adminthe request of potential bidders.
Following the extension, the second tender will open on December 21 and close on December 23, 2011 and the US$50 million issue is guaranteed by CBZ Bank. The first US$50 million issue, fully guaranteed by the Government, opened on December 9 and closes tomorrow.
“Following requests from potential bidders and in order to allow for possible future uses of the bills, the issuer and financial advisor wish to announce the extension of the tender of the AMA agro-bills.”
Proceeds of the bills are expected to finance the 2011/2012 agricultural season as part of the Government’s efforts to unlock additional funding by the private sector to meet some of the financing gaps identified in the current agricultural season.
Cabinet had earmarked US$21 million to pay out farmers owed by the Grain Marketing Board, US$18,6 million to cover what Government owes seed and fertiliser companies and US$4,5 million to kickstart deposits required by seed and fertiliser companies to begin deliveries. The biggest chunk, US$56,2 million, would be allocated to new commercial financing to communal, A1, commercial and A2 farmers.
This is the second time AMA is on the market to raise funding although the first tender was grossly undersubscribed. The authority only managed to raise US$4,5 million of the US$20 million required.
The 270-day bills had total bids amounting to US$17,6 million as investors were asking for high interest rates for the long-term paper. AMA indicated that 28 investors had made their submissions to the tender without giving details of how much had been allotted.
Against the background of a market short of liquidity, the bills could have been undersubscribed and the extension allowed more investors to bid. CBZ Bank had invited pension funds and provident funds, insurance
companies, life mutuals, commercial banks and other interested institutions, as well as individuals to subscribe to the bills.
Applications would be for a minimum of US$10 000 and the interest rate would be on a tender basis. The issue is expected to be fully subscribed as Government granted special features to entice investors.
Special features include prescribed asset status, liquid asset status and tax exemption status.
Liquid asset status means holders of the paper can borrow from the central bank overnight while prescribed assets allow pension funds and insurance companies to invest in Government portfolios.
The bills also have a tax exemption status, which means all investors will receive their money in full without paying tax. These are the first bills to be granted special features since dollarisation in February 2009 in a bid to increase subscription.
Meanwhile, the country’s money market has remained depressed due to lack of instruments, poor liquidity and reduced confidence. Zimbabwe faces a serious liquidity crisis following a decade of economic instability, which saw its Gross Domestic Product shrink by about 50 percent.
This has been compounded by limited foreign capital inflows over a perceived country risk profile. The liquidity crisis has resulted in the high cost of finance.
Online Reporter