GH¢3.3 billion of corporate bonds await issuance

Available data on activities on the Ghana Fixed Income Market show that about GH¢3.3bn worth of corporate bonds are outstanding to be issued by nine companies, including the government-owned ESLA Plc.

The bonds are part of a total shelf-registered issuance—that is, bonds registered with regulators to be issued over time—of GH¢12.1bn, of which GH¢8.8bn have been issued to date.

The companies involved are Letshego Ghana with outstanding issuance of GH¢70.67m; Edendale Properties (GH¢17.35m outstanding); Bayport Financial Services (GH¢191.56m); Ghana Home Loans (GH¢361m); PBC Ltd. (GH¢37.7m); ESLA Plc (GH¢2.37bn); Bond Savings and Loans (GH¢29.6m); Quantum Terminal (GH¢95m); and Dalex Finance (GH¢130m).

An analyst of the Fixed Income Market, who preferred be anonymous, said in an interview that the prospects for the bonds are positive, especially as private and institutional investors have begun receiving their locked up funds in the liquidated non-bank financial institutions and fund management companies, and would be exploring options to reinvest those funds.

“Also, with the poor performance of the stock market in recent years, the corporate bond market offers an opportunity for investors to earn returns above GoG securities, given the risk premium,” the analyst said.

Investors are looking forward to the impending bond issuances due to the significant risk premiums being offered, over both government debt securities and bank fixed deposits.

As at September 2020, corporate bonds offered coupon rates of up to 20 percent compared with similarly tenured government bonds (three to five years tenor) which offer well below 19 percent. Shorter term government treasuries offer between 14 and 16 percent.

Likewise, interest rates on fixed deposits, as at August 2020, were on average of about 11.5 percent for three months tenor.

Although corporate bonds are medium to long term with regard to tenors, the high liquidity on the Fixed Income Market means that bondholders can exit their investments whenever they choose since buyers are generally readily available.

Even though corporate bonds are riskier than government securities, the companies with prior approval for new issuances are widely regarded as safe investment bets.