The perfect storm of inflationary pressures, aggressive monetary tightening from central banks, combined with a deepening of the Russia/Ukraine crisis, have made capital raising via traditional bond markets, particularly, expensive for African countries whose governments have been forced to find innovative ways to raise capital, Co-Head of Loan Syndication at Rand Merchant Bank, Miranda Abraham,…The perfect storm of inflationary pressures, aggressive monetary tightening from central banks,...
“But now sentiment has turned; in a risk-off environment investors generally prefer to buy investment grade credits, and inflationary pressures mean that for investors, there are many opportunities, which are perceived as lower risk, and which now offer higher yields,” the banker said. Abraham added that banks active in Africa have reported an uptick in interest from sovereigns on these loan products as a workaround to traditional bond market funding. And as several loan market deals have not been refinanced, banks have excess capital and are actively looking for ways to deploy these funds.
Abraham continued: “Credit insurance is typically organised on a separate and private basis by individual banks when they join a syndicated loan to protect themselves from borrowers which may default. “This enhanced credit profile also has the benefit of reducing the cost of funding for the borrower.”