Institutional investor pumps $30m into ALCB's private funding round
HSBC Helps African Local Currency Bond Fund Raise $30 Million
The African Local Currency Bond Fund (ALCB Fund) has successfully raised $30 million from an unnamed UK-based insurance company. The funds were raised through the issuance of a 10-year bond under the Euro Medium Term Note (EMTN) programme.
The ALCB Fund, managed by Cygnum Capital, has a strategic focus on bridging local and international private capital markets via local currency bonds. This is aimed at enhancing African corporate bond markets and directing this capital towards sustainable development projects that support the Sustainable Development Goals (SDGs).
HSBC Continental Europe acted as a dealer for the bond issued by the ALCB Fund. Robert Anson, vice president of debt syndicate at HSBC, expressed delight in supporting the ALCB Fund in attracting institutional capital. He stated that the ALCB Fund transaction showcases how international bond markets can mobilize private investment for good.
The Baa1 rating by Moody's Investors Service played a crucial role in attracting institutional investors for the ALCB Fund. This rating, the second highest for an Africa-focused investor, provides greater confidence in creditworthiness, crucial for scaling issuance and private sector participation.
Since its inception in 2012, the ALCB Fund has invested over $420 million in African companies, focusing on sectors like financial inclusion, renewable energy, and affordable housing. The Fund's investments have achieved a 9.1x private capital mobilisation ratio.
The ALCB Fund's local currency mandate reduces credit risk by supporting businesses to match local assets and liabilities and tapping local institutional investors. This encourages sustainable financing in local currencies rather than foreign exchange-denominated debt.
The notes from the bond are listed on The International Stock Exchange. Hoback, a representative of the ALCB Fund, emphasized the importance of enabling businesses to match local assets and liabilities and tap local institutional investors as a source of funding. He also stated that the local currency mandate reduces credit risk.
Anson believes the ALCB Fund transaction will serve as a springboard for other investors to participate. The ALCB Fund is the second-highest rated Africa-focused investor, after the Africa Finance Corporation.
The ALCB Fund has backed 67 companies focused on sectors like financial inclusion, renewable energy, and affordable housing. Its investments have had write-off ratios of less than 2% since its inception. The Fund aims to leverage a robust capital structure supported by development finance institutions and to transition from primarily domestic private co-investment to also attracting international private institutional investors. This includes the use of its Euro Medium Term Note (EMTN) programme as a flexible platform for issuing bonds that appeal to a broad array of global private investors, thereby mobilizing significant private capital flows toward SDG-aligned businesses and projects in Africa.
- The ALCB Fund, focusing on financial inclusion, renewable energy, and affordable housing, aims to leverage a robust capital structure to attract international private institutional investors, such as those in the field of private equity, as seen in the recent $30 million investment by an unnamed UK-based insurance company.
- The investment in the ALCB Fund highlights the potential for development finance to support sustainable development projects in Africa, aligning with the Sustainable Development Goals (SDGs) and promoting business growth in sectors like affordable housing.
- The local currency mandate of the ALCB Fund not only reduces credit risk by supporting businesses in matching local assets and liabilities, but also encourages sustainable financing through local institutional investors, playing a crucial role in mobilizing private investment.
- As the ALCB Fund's success in raising $30 million showcases, the international bond markets can be an effective tool for directing capital towards socially impactful projects, such as those promoting financial inclusion, thereby contributing to overall economic development.
