DBN issues new N$130 million bond for housing

This guarantee will have the government taking responsibility to repay and service the debt if the bank defaults, and has also partly allowed the bank access to cheaper credit.The new seven-year bond, DBN29, was issued via private placement on 4 March, which Inkumbi said he was not at liberty to disclose the takers. “The subscriber is, however, a Namibian Institutional investor. Further, because this bond is listed on the NSX, it could have changed hands from the initial investor already,” he said.The bond will mature on 5 March 2029.According to a press release issued by the bank, the DBN29 bond will pay interest quarterly at 2,4% above the average rate at which banks buy and sell money – a floating rate which will have the coupon rate 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.The bond is the bank's first sovereign guaranteed bond. This will have the DBN joining other state-owned enterprises, such as NamPower and NamWater, which have bonds guaranteed by the state.The 2022/23 budget fiscal strategy states that the government is expected to issue guarantees to public enterprises in strategic sectors to enable them to function and provide the necessary service to citizens.This will have the state ultimately responsible for debt to the tune of N$12 billion at the end of 2022/23, increasing to N$17,4 billion by 2024/25.The treasury has projected the nation's N$140 billion debt balance at the end of the 2022/23 fiscal year. And more guarantees are expected to add more pressure to the state's creditworthiness.Inkumbi said, “DBN approached the government for a guarantee in this case, to enable the bank to raise the funds at a favourable price and pass on such price to the investee housing projects”.The DBN says because bonds come with a high interest cost for use of investor funds, these funds would be used to finance infrastructure and large enterprises. “These categories have a lower risk of impairments and defaults. Small and medium enterprises have a higher risk of impairments and defaults, so they are financed from the bank's development portfolio,” the bank says.In total, the DBN has issued five bonds, including DBN29, since it listed its medium-term note programme on the Namibian Stock Exchange 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 the funding of development.The first bond, DBN20, was fully repaid at maturity at an amount of N$291 million issued. DBN20A1, an amortising 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. The DBN23 has repaid N$203 million and has N$87 million still in issue.DBN20, DBN20A1, DBN20B and DBN23 redeemed part of their capital amounts 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 the DBN, 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.Email: lazarus@namibian.com.naTwitter: @Lasarus_A