Standard Bank Limited has won the EMEA Finance award for the structuring advice it rendered to Malawi’s grid-power supplier – Electricity Supply Corporation of Malawi (ESCOM) Limited – which enabled the utility supplier to repay ZAR 79 million (about K3 billion) it owed the Development Bank of South Africa (DBSA).
Making the announcement Standard Bank Malawi Limited Chief Executive Andrew Mashanda said the transaction involved restructuring the ZAR 79 million DBSA loan which ESCOM owed. The DBSA loan was secured by a Zero Coupon Note issued by Investec in favour of ESCOM with a maturity value equal to the loan principal.
A zero coupon note is a Promissory Note that pays at maturity the value of the note with no separate interest payments. One of the roles of Standard Bank was to ensure that ESCOM was able to get the highest discounted value for the note which as part of the restructuring was being sold before its maturity in June 2019.
According to Andrew Mashanda, Chief Executive, Standard Bank, the bank’s role in the transaction included advising ESCOM on the various structuring options, negotiating with DBSA and Investec on behalf of ESCOM, discounting the Promissory Note through its structured sales team and using the proceeds to partially repay the loan. Through its Global Markets team, Standard Bank built and remitted a total of ZAR 37.5 million on behalf of ESCOM to repay the outstanding amount of the loan.
“The award shows Standard Bank has the capacity to advise its clients on how best to benefit from their money. The ESCOM transaction was voted the best restructured deal in Europe, Middle East and Africa because Standard Bank’s Investment Banking team structured and negotiated the prepayment with DBSA without any break costs being applied. In addition it ensured that ESCOM saved ZAR1.5 million in interest per month which improved its free cash flow position,” said Mashanda.
Mashanda added that the transaction has helped eliminate forex and interest rate risk for the company. He said this transaction affirms Standard Bank as a true African Bank with a pool of personnel geared towards transforming Africa financially and economically.
The USA Millennium Challenge Corporation (MCC) has established a $350 million compact which is aimed at developing power generation capacity in Malawi. As a condition to signing the compact, government agreed that ESCOM should restructure its balance sheet and convert all government debt into equity and repay all commercial debts. One of the commercial debts was the DBSA loan.
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