IDBZ initiates bonds listing

HARARE - The Infrastructure Development Bank of Zimbabwe (IDBZ) has begun the process of listing its $65 million bonds on the Financial Securities Exchange (Finsec), three years after mulling the idea.

The bonds, floated in 2014, were used to raise funding for the completion of prepaid electricity metering project and the refurbishment of Kariba South Power Station.

IDBZ yesterday said since the issuance of the bonds in November 2014, investors have continued to hold the instruments with no opportunity to trade them on the secondary market prior to maturity.

“The very limited secondary market trading in the bonds has been based on the private arrangements between investors but with no opportunity for price discovery.

“The need to facilitate efficient trading of the bonds on the secondary market in a transparent manner has led to the IDBZ to seek admission of the bonds onto the fixed income board of the Finsec ATP,” the bank said.

The principal reason for listing the bonds include broadening market participation in the trading of bonds to include stockbroking firms, custodians and qualifying individuals and institutional investors.

“Enhancing the liquidity of the bonds due to the wider access that buyers and sellers will have to professional broking services on Finsec,” the State-owned development bank said in an abridged pre-listing statement.

IDBZ noted that listing of the bonds, with a five year tenure and coupon rate of eight percent per annum, will also allow for a market-determined price discovery mechanism in the trading of the bonds.

The bank said this will also assist in “unlocking bondholder value through access to a bigger trading platform with a variety of market participants”.

IDBZ is currently on the market to raise $14,8 million for the Kariba Housing Development Project through a private placement. It is also raising $5,8 million for Empumalanga West in Hwange and $12,1 million for Sumben Housing Project in Mt Pleasant, Harare.

Market experts say the listing of the bonds would make them easier to sell and improve their credibility.

“The trend in international markets such as the New York stock Exchange and Nasdaq is that you can put an offer out there and see what the market is willing to pay, and that is always how it has been done,” said a stockbroker with a local investment firm.

“People who like to trade bonds and not hold till maturity might find going to a brokerage house a positive. Because that firm will always buy the bonds back from you,” she said.

Due to the absence of cheap external credit lines and the biting liquidity crunch in Zimbabwe, bonds are increasingly being seen as a tool for plugging funding gaps arising from the fiscal pressure.

Zimbabwe has an estimated external debt of $10 billion, thus making it difficult for the southern African country to access cheap loans.