Another N$130 million for development finance, funded by private investors

The Development Bank of Namibia (DBN) has issued a new bond, DBN29, with a face value of N$130 million. The 7-year bond was issued via private placement on 4 March 2022, and it matures on 5 March 2029.

DBN29 was issued with a spread of 240 basis points above the 3 month JIBAR, the Johannesburg Interbank Average Rate, meaning it will pay interest quarterly at 2.4% above the average rate at which banks buy and sell money. As the 3 month JIBAR is set quarterly, DBN29 is a floating rate bond and the interest rate will change every three months.

Payments of interest will be made quarterly in arrears, and the capital amount of N$130 million will be repaid on 5 March 2029, when the bond matures.

The bond is the Bank’s first sovereign guaranteed bond, so its repayment is guaranteed by the Government.

As bonds come with a high interest costs for use of investor funds, DBN bonds are used to raise funds to finance infrastructure and large enterprises. These categories have a lower risk of impairments and defaults.

SMEs have a higher risk of impairments and defaults, so they are financed from the Bank’s Development Portfolio (DP).

In total, DBN has issued five bonds, including DBN29, since it listed its medium-term note programme on the Namibian Stock Exchange (NSX) in 2017.

The programme falls within the twin mandate elements of the Bank to develop new, sustainable methods of investment and to enable the private sector to participate in funding of development.

The first bond, DBN20 was fully repaid at maturity at an amount of N$291 million issued. DBN20A1, an amortizing bond, has paid N$112 million and has N$28 million still in issue. DBN20B has repaid N$49 million and has N$21 million still in issue. DBN23 has repaid N$203 million and has N$87 million still in issue.

DBN20, DBN20A1, DBN20B and DBN23 redeem(ed) part of their capital amounts (subscriptions) plus interest every six months, unlike DBN29 which will pay interest quarterly, but will only repay the capital amount of N$130 million on 5 March 2029.

Currently, bond subscriptions are issued via private subscription to large institutional investors who wish to invest in DBN paper, while contributing to development. The Bank expects to hold an auction for public subscriptions which will be open to all qualifying investors. Bonds are denominated at N$1 million per bond with subscriptions allocated according to the interest rate at which investors are prepared to subscribe for the bonds.

DBN is rated by Fitch Ratings. The bank currently has a foreign currency long-term issuer default rating (IDR) of 'BB'/Outlook Negative and a national long-term IDR of 'AAA(zaf)' /Outlook Stable.