Faridah Kulabako
4 November 2009
Housing, agriculture, construction and agro-processing are some of the sectors set to benefit from a Shs8.5 billion bond issued yesterday on the Uganda Stock Exchange by PTA Bank.
The money is the first tranche of a Shs40 billion capital-raising exercise that the bank intends to undertake for the next 12 months.
PTA bank - a regional trade and development bank covering 17 African countries including Uganda - expects to raise funds from the open market for onward lending to needy sectors to boost the performance of the economy.
Mr Alex Gitari, the bank's director of finance, said the funds that have been raised will finance projects and investments underlying local currency loans so as to avoid the exchange risks associated with foreign currencies that some local borrowers have incurred.
The PTA bond - debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing - is the latest in the last three months on the Uganda market after Stanbic Bank issued a Shs30 billion bond and telecom giant MTN raised $100 million in a syndicated loan arrangement.
Speaking during the bond listing exercise at the USE offices in Kampala yesterday, the bank's president Dr Michael Gondwe said the bank opted for a tranched programme to kick-start capital-raising to avoid the risk of overloading the market.
"PTA will be returning to the market for the remaining tranches in the course of the year and the decision as to when and how much the next tranche would be made closer," Dr Gondwe said.
PTA's Shs8.5 billion issue is a seven-year issue priced at either 14 per cent or a floating rate of 1.25 per cent over the 182-day Uganda government Treasury bill.
The PTA comes at a time when access to cheap credit is a major concern to many businesses as commercial banks have maintained high interest rates on lending.
In 1999, the bank issued a five-year Shs15 billion bond with principal and interest payable semi-annually in arrears which was fully redeemed in 2004.
Dr Gondwe said the bank has lent out close to $120 million to businesses in the country which has had a positive impact on the economy. He also said the financial institution has a project worth $50 million in the pipeline which they hope to close in the near future.
"Uganda remains among the top five beneficiaries of the bank's facilities and with this bond, we hope to further entrench ourselves in the market as a financier of choice," he said.
The Stanbic Bank bond was ticked as successful underscoring a high investor risk appetite which according to USE chief executive office Simon Rutega is a pointer to the availability of financiers.
"Most entrepreneurs have vague ideas that are not developed to the stage where they should be financed but financers are available," said Mr Rutega adding that though many international investors had pulled out of stock markets a the peak of the global economic recession, they were starting to come back as the economy recovers.
In 2007, PTA raised Ksh1 billion on the Nairobi Stock Exchange. It also issued a TShs15 billion seven-year bond in Tanzania in 2004.
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