Abena Amoah, Managing Director (MD) of the Ghana Stock Exchange (GSE) has stated that the return of activities to the primary market for the first time since the conclusion of the Domestic Debt Exchange Programme (DDEP) signified a restart of the domestic bond market.

This comes as the instrument – a tranche of GHC50 million two-year senior unsecured floating rate notes benchmarked to the 182-day T-bill rate and forming part of Bayport’s newly established GHC500 million medium-term notes and bond programme – was closed at the end of March.

“The DDEP has presented all of us with unique opportunities; one is the opportunity to reduce the cost of capital from the previous dizzying heights to more sustainable levels, and the other is an opportunity to diversify our investment options.”
Abena Amoah

Ms Abena, meanwhile, described the listing as a significant milestone that will attract more investors, noting that the Accra bourse is working to restore investor confidence while growing the market by introducing new products and initiatives to attract investors.

“For us at the GSE, we will continue to ensure that there is transparency and effective market oversight,” Ms Abena assured.

In February, after completion of the DDEP, the nine corporate issuers on the GFIM, minus quasi-government entities ESLA and Daakye, accounted for approximately 1.05% of the outstanding local debt stock, compared to Treasury debt instruments which represented about 83%.

Despite March 2023 closing with a total trade volume of 5.57 billion valued at GHC5.26 billion – an 80.18% and 81.7% dip compared to the same period in 2022 as a result of the DDEP, the GSE’s MD believes the debt exchange programme has provided the market with some opportunities: the reduction of rates and introduction of new products.

Optimism About the Market’s Reaction

The Chief Executive Officer (CEO) of Bayport, Akwasi Aboagye, expressed optimism that the market’s reaction, which includes oversubscription of the notes by approximately 37%, in addition to a coupon rate of 1.45% over the benchmark – the most competitively priced issuance by Bayport Ghana in its eight-year history of accessing the domestic capital markets – will see the corporate debt grow its share of the market.

“In spite of the gloomy market backdrop at the time of issuance, occasioned by effects of the recently concluded Domestic Debt Exchange Programme, participation was impressive with orders seen from a diverse pool of investors that had earlier expressed interest and also confirmed their continued confidence in the Bayport credit story, given its two decades’ operating history in Ghana.

“This transaction is a landmark deal and its successful outcome also marks the reopening of the Ghanaian primary bond market and sets the tone for other corporate institutions to access funding to optimise their capital structures and support their growth strategies.”
Akwasi Aboagye

The CEO disclosed that a considerable portion of the funds from the bond proceeds, which matures in 2025 with bi-annual coupon payments on 28th September and 28th March, will be allocated toward bolstering payroll lending initiatives targetted at supporting low-income public sector employees.

Aboagye also stated that success of the issuance, which involved a series of investor engagements and a physical roadshow, is a testament that investors remain committed to well-run entities, state or private.

Last year, Bayport grew its total assets to GHC824 million, buoyed by interest income of GHC293 million. It recorded a pre-tax profit of GHC39.4 million.

The GSE Is promoting the listing of approximately 36 new corporate bond issuers on the Ghana Fixed Income GFIM over the next five years, which translates to an average of at least five new issuers per year. This move aims to provide long-term funding opportunities to the private sector.

Institutional investors such as pension funds, collective investment schemes and insurance companies are on the rise, but they have limited investment options in capital market products due to the restricted tradable options which are mainly limited to government debt, a few corporate bonds and a few equity listings.

The executive secretary of the Chamber of Corporate Trustees, Thomas Kwesi Esso, on the sidelines of the event said the pensions industry is looking forward to a more diverse market and will play its part in that regard.