Barclays Africa in USD400million debut bond sale post ‘divorce’ to capitalise operations

Barclays Africa Group Limited, made a US$400million debut in the international capital markets to capitalise its operations.  The notes (XS1799058174) issued on April 18 were priced at 6.25% (6.250%<=2023-04, 3.523%+UST5Y<=2028) and traded on 26 April on the London Stock Exchange. The bond is rated Ba2 (Moody’s), BB (Fitch) and was raised with intent to ‘supplementary’ capitalise business operations for which the entity has aggressive plans to double growth rates over the coming years as it rebrands to Absa by 2020. The last time Barclays Group tapped the international dollar debt market was over a decade ago which makes this sale ‘BAGL’s debut’ issuance post its divorce from Barclays Plc. The sale was 3.75x oversubscribed with book orders exceeding USD1.5billion in London, Hong Kong and Singapore.

“We continue to see the faith international investors have in African assets especially after Barclays Africa Group sold its strategy to international investors. This bond sale was good timing especially that US treasuries used to benchmark dollar assets are on the uptick. BAGL got it just before dollar debt becomes expensive. Our analysts continue to track the attractiveness of dollar assets especially ones raised by African entities’ Ngwalayi Garikayi a Business Times Analyst said in a note from London on 02 May. Most Barclays subsidiaries beat market expectations in 2017 post the divorce with Barclays Plc where operations were exceedingly resilient and profitable proving that opportunity really lies in Africa, she said  The dollar bonds were the second ever ‘Third Basel Accord or Basel Standards’  in Southern Africa. Basel III  is a global, voluntary regulatory framework on bank capital adequacy, stress testing, and market liquidity risk.   

“The team’s marketing effort was paramount to the success of the transaction,” said Group Treasurer Deon Raju, adding that foreign investors have a wide range of competing investment options from which they can select. “Choosing an optimal execution window and accelerating the timing of execution were also key to the success of the effort,” he said in a press release.

The outcome of the capital raising effort is positive for Barclays Africa Group, both in terms of the total volume of the capital that the group was able to raise, and the pricing achieved, said Raju. This inaugural bond issuance and listing on the London Stock Exchange has also laid an important foundation for future funding access for the Group in pursuit of its growth strategy, added Raju.

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