The African Development Bank (AfDB) on Tuesday, July 17, 2012 opened books on its 125 billion Ugandan shilling medium-term note (MTN) programme. The first issue of the programme, which is a 10-year, 12.5 billion Ugandan shilling bond is open for subscription through July 20, 2012. The coupon to be re-priced at two year intervals will be pegged at 85 percent of the yield on Uganda’s two-year government bond benchmark.The yield on the Bank of Uganda’s scheduled auction of 100 billion shillings of two-year bonds on Wednesday, July 18, 2012 will be used to determine the coupon on the bond. The same issue yielded 15.16 percent when it was last sold in May. The auction is expected to be over-subscribed and rates are expected to drop by as much as 100bps. According to Olivier Eweck, manager of African currencies’ funding at the AfDB, the MTN programme will allow the AfDB to issue bonds in multiple tranches to fund infrastructure and other projects in the east African nation. He noted that a second tranche of the triple-A-rated AfDB’s bond will be issued before the end of 2012, and is likely to be the same size as the first.African Alliance Uganda has been appointed sponsoring broker for the AfDB’s note programme but investors can place an order via any broker on Uganda’s Securities Exchange.“This is a landmark bond,” said Pierre Van Peteghem, the AfDB’s treasurer. “Unlike previous African currencies linked bonds issued by the Bank, all coupon and principal (re)payments will be made in shillings and there will be no currency swap attached to the transaction,” he added.As part of its local currency initiative, the AfDB has since 2005 issued a series of bonds denominated in or linked to the Botswana Pula, Ghana Cedi, Kenya Shilling, Tanzania Shilling, Uganda Shilling, Zambian Kwacha and the Nigerian Naira in offshore markets. It is also a regular issuer in South African rand, which is its third-largest lending currency.Charles Boamah, AfDB vice president for finance said: “This is part of a larger programme of helping capital markets develop on the continent. We believe that deep, liquid capital markets are needed to support economic growth”
