Investors active in the public securities market of the Bank of Central African States have been invited to subscribe to an issue of assimilable Treasury Bonds. (OTA) of the Cameroon Government.
Through this operation on OTAs with 5 years of maturity, paid at 5.7%, the Cameroonian Treasury hopes to be able to mobilize an envelope of funding between 50 and 100 billion FCFA, for the realization of certain infrastructural projects in the country.
This operation is part of a series of three issues of public securities programmed on this market by the Cameroonian government, with the effect of raising a total envelope of 220 billion FCFA. In 2019, such an operation had already enabled the government to mobilize more than the 150 billion FCFA initially requested.
By observation, instead of the financial market (DSX and now BVMAX since the unification of the two exchanges) on which Cameroon has successfully aligned bond loans since 2010 (795 billion FCFA mobilized on this market on February 29, 2020 , according to the Ministry of Finance), the Treasury seems to have changed its tune. It is the BEAC public securities market which is now winning its favor in terms of mobilizing financing on the capital market. In total, 1 867.4 billion FCFA were raised there at the end of February 2020, according to official figures.
The use of OTAs has very competitive costs on the money market. “The government has refocused on the BEAC money market, which is the traditional market for public treasuries and banks, to issue OTAs whose average loan duration is longer than bonds. OTAs offer a longer grace period to the State, in so far as the principal amount is reimbursed only at the end of its maturity, unlike bond loans whose repayment generally takes place by quarter, from the second year ” Samuel Tela, Director of Treasury at the Ministry of Finance explains.
The latter also specifies that on the money market, the initiation of a transaction is much less restrictive in terms of execution times. “Within a maximum period of 45 days, all incentive, awareness, communication and subscription actions can be accomplished, unlike the bond loan which takes on average 6 to 8 months to succeed”, corroborates an internal note from the ministry Finance to which Investir au Cameroun was able to gain access.
However, beyond the flexibility and speed that it offers to issuers, the money market appears to be highly more competitive than the financial market, in terms of the costs of services, notes an official of the Treasury.
Unlike a bond loan on the financial market, a fundraising operation on the money market does not require the recruitment by tender of an arranger called to form a syndicate of placement. The absence of this constraint implies, we learn, “the absence of the underwriting commission (0.95% of the amount of the underwriting), the absence of the underwriting commission (0.9% of the amount subscribed), the absence of lump sum disbursements (100 million FCFA for the 2018 loan), then the absence of the registration procedure at COSUMAF, that is 0.3% of the amount issued ”.
In total, when these costs are added up, OTA issues on the BEAC market save the Treasury about 2% of the total amount of subscriptions, i.e. 1.78% syndication commissions and 0.3% of registration fees. In cash, savings of around 4.4 billion FCFA are expected from the 220 billion FCFA of OTA that Cameroon launches on April 8, 2020 on the money market.