Corporate issuers step-up issuance by GH¢2.9bn; remains a viable option for investors

the Ghana Fixed Income Market

Corporate issuers on the Ghana Fixed Income Market (GFIM) have increased issuances by raising about GH¢2.9billion as of end April 2022 in fresh capital compared to the same period last year, data from the Ghana Stock Exchange have shown.

Per the available data – out of the eight issuers on the market – four entities including the two quasi-government special purpose vehicles ESLA Plc and Daakye Trust Plc increased their issuances during the period, while the remaining either issued less or remained the same as the amount raised in 2021.

Cumulatively, ESLA Plc has issued GH¢8.86billion; Daakye Trust Plc has issued GH¢2.45billion; Letshego Ghana – GH¢298.69 million and; Izwe Loan Ltd. – GH¢97 million. Bayport Financial Services and Quantum Terminal Ltd. reduced their issuances to GH¢188.15million and GH¢25million, respectively. Dalex Finance Company and Bond Savings and Loan Ltd. remained the same as in the comparative year at GH¢20million and GH¢70.4million respectively.

As of last week, corporate bonds offered coupon rates of up to 21.8 percent, compared with similarly tenured government bonds (three to five years tenor) which offered just about 19.85 percent.

The corporate bond market is nascent with a very limited number and type of issuers of 11 listed bonds, with the total amount outstanding being GH¢12.79billion as of April 2022 – which is small compared to the outstanding government of Ghana bonds at GH¢155.71billion.

Currently, the corporate debt market has about GH¢4.88billion yet to be issued, given that approximately GH¢12.79billion has been issued to date; less than the shelf-registered issuance target of GH¢17.67billion of bonds approved by the Securities and Exchange Commission and Ghana Stock Exchange.

While it is still unclear when each company will issue the bonds approved – which will be done in tranches – institutional investors, in particular, are increasingly seeing them as preferred financial instruments for their respective investment portfolios amid lower yields on the medium- to longer-dated government securities.

Investors will be looking toward these impending bond issuances because of the significant risk premiums they will offer.

Even though corporate bonds are riskier than government securities, the companies with prior approval for new issuances are widely regarded as a safe investment as applications to issue corporate bonds are closely scrutinised by both SEC and the GSE – neither of which are as yet willing to see below investment grade debt securities listed on GFIM.

Indeed, most of them have already issued some tranches of their approved bonds and not defaulted on any interest or principal payments so far.

Increasing corporate debt issuers

In making available long-term funding to the private sector, the Ghana Stock Exchange (GSE) is advocating the listing of some 36 new corporate bond issuers on the Ghana Fixed Income Market (GFIM) in the next five years; thus, at least five new issuers per year.

The limited number of corporate bonds, coupled with the small size of amount raised, provides little scope for secondary trading. Nonetheless, this market is projected to grow significantly in the coming years.

Institutional investors such as pension funds, collective investment schemes and insurance companies are growing but have few investment options in capital market products, since current tradable options are limited to government debt, a few corporate bonds and a few equity listings.


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