Private capital institution pours $30m into ALCB's coffers for initial investment
The African Local Currency Bond (ALCB) Fund, established in 2012, has been a significant player in supporting the development of African capital markets. Managed by Cygnum Capital, the fund has deployed over $420m, backing 67 companies across various sectors in Africa.
One of the key factors that have contributed to the ALCB Fund's success is its low write-off ratios, which have remained under 2% since its inception. According to fund lead, Brock Hoback, this is due to the local currency mandate of the ALCB Fund.
Recently, the fund raised $30m (€25.6m) from an unnamed UK-based insurance company, marking a significant milestone. The funds were raised through the issuance of a 10-year bond under the ALCB Fund's Euro Medium Term Note (EMTN) programme. The notes from the bond are listed on The International Stock Exchange.
The Baa1 rating by Moody's Investors Service, making it the second-highest rated Africa-focused investor, after the Africa Finance Corporation, has played a crucial role in attracting institutional investors for the ALCB Fund. This high rating, according to Hoback, materially reduces credit risk.
The strategy of the ALCB Fund is to mobilize private capital in support of the Sustainable Development Goals (SDGs) by deepening African capital markets through promoting local currency corporate bond issuances. This approach aims to attract both domestic and international private institutional investors.
Key elements of this strategy include issuing bonds through the EMTN programme, requiring local co-investment alongside every supported bond issuance, and leveraging a robust capital structure underpinned by development finance institutions.
Robert Anson, vice president, debt syndicate at HSBC, expressed delight in supporting the ALCB Fund in broadening its investor base and attracting institutional capital to support African markets. Anson also expects the transaction to serve as a springboard for other investors to participate.
The ALCB Fund's investments have achieved a 9.1x private capital mobilisation ratio, a significant achievement that demonstrates the fund's success in catalyzing private capital flows into African local currency bond markets. This strategy, according to Hoback, is a "significant step forward" for supporting the SDGs.
In conclusion, the ALCB Fund's strategy is to catalyze private capital flows into African local currency bond markets by combining international bond issuance platforms, strong institutional backing, local investor co-participation, and focus on sustainable development outcomes aligned with the SDGs. This approach is expected to continue attracting investment and supporting the growth of African markets.
[1] Source: ALCB Fund Press Release, 2022 [4] Source: ALCB Fund Website, 2022
- The ALCB Fund, with its focus on supporting the Sustainable Development Goals (SDGs), is striving to mobilize private capital for affordable housing, social impact, and energy transition projects in Africa by deepening African capital markets.
- The Baa1 rating from Moody's Investors Service, a testament to the ALCB Fund's financial strength, has been instrumental in attracting institutional investors, thereby facilitating finance and investing in renewables and development finance initiatives.
- The strategy of the ALCB Fund, which includes issuing bonds through the Euro Medium Term Note (EMTN) programme, requiring local co-investment, and leveraging a robust capital structure underpinned by development finance institutions, is paving the way for financial inclusion, enabling more businesses to participate in the energy transition and development finance.
- By achieving a 9.1x private capital mobilization ratio, the ALCB Fund has demonstrated its significant impact on catalyzing private capital flows into African local currency bond markets, thus making strides in the energy transition, affordable housing, and sustainable development in alignment with the SDGs.
