Investors tumbles over ESLA’s highest-yielding Cedi bond

 

 

 

Adnan Adams Mohammed

 

The Energy Sector Levy Act (ESLA) Plc’s 12-year cedi-denominated bond re-opened, last week has been oversubscribed attracting all-time high yield between 20.50 to 21.00 percent.  

 

The instrument was traded as Tranche E4-B under the GHC10 billion bond programme. Bids submitted amounted to almost GHC1.2 billion (GHC1,199,538,146.00) within the pricing range of 20.50 percent to 23.50 percent. Of this, GHC1,199,052,646.00 was accepted within the pricing range of 20.50 percent to 21.00 percent.

 

The ESLA bond, which was originally issued on January 13, 2020, pricing echoes the current hard time the global economy and financial market is going through amidst the pandemic Coronavirus (COVID-19).

 

“Proceeds from this issuance will be used to settle portions of the outstanding legacy debt and other obligations due to suppliers and other creditors within the energy sector,” ESLA stated in a statement.

 

The oversubscription of the highest yielding cedi-denominated bond happened in the same week the Bank of Ghana announced a cut in Monetary Policy Rate by 150 basis points to 14.5 percent.

 

The bonds will mature on December 29, 2031.

 

Initially, the target size of Tranche E4B was GHC600 million and the minimum and maximum sizes the Issuer intended to accept were GHC300 million and GHC1,867,234,000 respectively.

 

This brings the total issuance under the GHC10 billion bond programme to GHC8.294 billion. The total outstanding amount on ESLA Plc bonds is GHC7.629 billion comprising GHC2.260 billion, GHC2.740 billion, GHC1 billion and GHC1.629 billion for the 2024, 2027, 2029 and 2031 bond maturities respectively.

 

Of the outstanding bonds, GHC664 million was redeemed in a buyback transaction financed with funds from the Lock Box account. This is made up of portions of the 2024 and 2027 bonds.

 

At the initial issuance of Tranche E4, ESLC Plc indicated that, the bond issuance had been necessitated due to the enhancement of inflows into the ESLA, as a result of the increments in the energy debt recovery levy by the government announced during the 2019 mid-year budget review.

 

E.S.L.A. Plc is expected to continue to undertake periodic buyback and cancellation of outstanding bonds using proceeds in the Lock Box Account via open market operations.

 

The Bonds are backed by the Energy Debt Recovery (EDR) Levy imposed under the Energy Sector Levy Act.

 

The Tranche E4-B Bond issuance has been listed on Ghana Fixed Income Market (GFIM).