ABIL raises money at good rate

Yesterday we saw a great vote of confidence for African Bank. One of the markets main concerns with the stock was African Banks ability to raise money in the bond market after falling out of favour with shareholders. If the market is worried about the prospects of the company then surely bond investors would also be concerned about Abil's ability to pay them back. This has not turned out to be the case.


"African Bank (a wholly-owned subsidiary of ABIL) has successfully issued a ZAR 1 billion three year bond under its Domestic Medium Term Note (DMTN) programme. The issue is part of African Bank's R25 billion DMTN programme designated for general funding purposes."


I guess the most important question has to be what rate are they paying? 275 bps above the prevailing Jibar rate, which at the moment is around 5.14%. The last money raising of this nature was in February where they paid 195 bps above the bench market. I guess paying up was to be expected. Not only because the company is facing a lot of negative sentiment but also because the world is a different place to what it was in February. Interest rates are increasing on the back of the US Fed tapering quantitive easing. The South African consumer is also perceived very differently to what it was in February while the Rand has tanked as money has flowed out of developing markets.


And this is why management are very happy with the rate they got and rightfully so. People need to realise that this is a cyclical business and rates change all the time. Sometimes this favours Abil, sometimes it does not. Gavin Jones, who I actually had a chat to yesterday about the matter and who is the head of funding at the company had the following to say in the announcement.


"We are pleased with the strong vote of confidence from South African debt funders. This issue demonstrates our ability to fund ourselves successfully in difficult market conditions."


On a different note but regarding the same company, another release came out this morning. It stated that Coronation Asset Management had informed the market that accounts under its management have increased its holding in Abil to 5.65% of total issued shares. At current market cap that is about R706 million worth. Coronation have billions to work with so this is small for them but not for Abil. It follows a statement on the 4 of June that the PIC now have a 15.16% stake in the business. It is very good to have these big long holding shareholders and nice to see a bit of good news for the business.