31 Oct 2018
Second tranche of Mixta Nigeria NGN 7.5 billion bond programme issued
Refinancing of shorter-term expensive local debt into longer tenured instruments will secure development of 5,000 affordable houses.
Mixta Real Estate Plc. (“Mixta Nigeria”) has now issued a total of NGN 7.5 billion of bonds guaranteed by GuarantCo Ltd (“GuarantCo”) to support affordable housing projects in Lagos, Nigeria. The series 1 tranche, issued in 2017, was for NGN 4.5 billion and the series 2 tranche A bond was for NGN 3 billion. Alongside the series 2 tranche A bond, Mixta also raised an additional NGN 2.3 billion through an unguaranteed tranche B in which African Local Currency Bond Fund was a cornerstone investor.
A challenge facing most developers of affordable housing is the availability of long-term funding which is necessary to develop and provide access to housing at a monthly cost that is affordable to the highest percentage of the population. Through the support of GuarantCo, a Private Infrastructure Development Group company, Mixta Nigeria was able to tap into long-term funding from the local institutional investors through the issuance of these bonds.
According to the Centre for Affordable Housing in Africa (2016), Nigeria has a deficit of 17 million housing units for an estimated population of 182 million people. This scarcity of housing is the result of a lack of long-term affordable funding options for developers and buyers, leading to a shortfall of affordable housing, expensive local debt and consequently high prices. GuarantCo’s support will enable the refinancing of shorter-term expensive local debt into longer tenured instruments, and to secure the development of 5,000 affordable houses. As a result, over 24,000 additional people will have access to affordable housing in Nigeria whilst creating 1,130 jobs at the construction site.
The value of strong partnerships with DFI’s like GuarantCo will strengthen our market positioning and differentiate our business. They provide an opportunity for Mixta to deliver on its objective to provide affordable housing across Nigeria while we stabilise our cost of capital. Rarely do you find an institution that is focused on providing creative solutions to the housing challenges in Africa.
Agusto & Co, a leading Pan African credit rating agency, is of the opinion that the credit quality of GuarantCo is the equivalent of an AAA long-term Naira currency national scale rating. In April 2018, Moody’s Investors Service affirmed GuarantCo’s A1 rating whilst Fitch Ratings affirmed the company’s AA1 rating in May 2018. These ratings are indicative of GuarantCo’s solid capital position as well as its established track record of providing local currency guarantees to finance private infrastructure projects in emerging markets.
We are delighted to have extended our support to Mixta Nigeria. Rapid urbanisation is increasing demand exponentially, leading to a shortfall of affordable housing in Nigeria and Africa as a whole, and supply is currently insufficient to meet even a fraction of this demand. Developing appropriate debt financing solutions for both developers and buyers is a core strategy for GuarantCo. In addition to our work with Mixta Nigeria, we are also supporting affordable housing projects in India and Vietnam with a number of others in the pipeline as we are looking to step up our activity in this sector.
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