Kasapreko, Letshego liven up corporate bond market

Uncertainties arising from the impending Domestic Debt Exchange Programme (DDEP), coupled with rising interest rates and foreign exchange fluctuations, will take a toll on the equities market say analysts.
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The first two months of 2024 have brought with them a decent level of activity in the domestic corporate bond market, with two notable issuances by Kasapreko, the indigenous beverage manufacturer, and Letshego, a financial services provider.

Data from the Ghana Stock Exchange (GSE) show that the former has successfully raised GH¢103.75million through a senior unsecured fixed-rate note issuance. This forms the first tranche of its Series 1 bond programme, with a total target size of GH¢600million.

Beverage giant Kasapreko made a splash with its three-year bond, maturing in January 2027 as it carries a significant coupon rate of 26 percent – making it an attractive option for yield-hungry investors.

This move comes amid Kasapreko’s ongoing expansion plans, including the recent launch of a new factory and product lines. It is anticipated that the company will utilise the raised funds for capital expenditure, working capital requirements and potential debt refinancing as it seeks to solidify its market position and explore new opportunities.

Letshego in January expanded its existing GH¢300million Note Programme to a total of GH¢500million, with analysts saying the contrasting efforts’ success highlights the growing appetite for corporate debt in the country.

This comes as analysts, including those at Databank, foresee a rise in corporate issuance for 2024 – propelled by better liquidity in the money market and an expected shift of yields away from the 30 percent range.

The company’s market insights for the year emphasise the anticipation of corporations seeking funds through fixed-income markets, with regulatory efforts to activate the commercial paper market for shorter-term securities being a significant contributing factor.

The market’s general sentiment suggests that the convergence of enhanced liquidity and optimistic yield projections will create favourable conditions for corporate issuance, offering appealing prospects for investors seeking to diversify their portfolios beyond longer-term government securities.

“We anticipate an uptick in corporate issuance for 2024 as yields move beyond the 30 percent threshold. Activating the commercial paper market for shorter-term securities will provide new avenues for corporate fundraising. With improved liquidity and positive yield expectations, we foresee attractive opportunities for investors,” Databank highlighted in its outlook.

Other analysts have expressed concern about sustainability of the corporate issuances’ rates, which have had to keep in step with the Treasury yield regime.

Yields on Treasury bills (T-bills) have continued to decrease over the last five weeks, reflecting the disinflationary trend and strong investor demand.

During the last auction, yields decreased – with the 91-day and 182-day bills contracting to 28.30 percent (-0.29 percent) and 30.79 percent (-0.3 percent) respectively. The 364-day yield experienced the largest decline, closing at 31.40 percent (-0.4 percent). However, they remain above the historical average by as much as 10 percentage points.

Nonetheless, these issuances reflect the market operator’s engagement with prominent corporations and underscore the array of strategies companies can utilise to access capital on the GSE. Kasapreko’s high-yield approach appeals to investors seeking aggressive returns, while Letshego Ghana’s expansion prioritises long-term growth and social impact.

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