1. ICAM CONFERENCE THE ROADS FUND K10 BILLION BOND STORY: AN INSIGHT
A PRESENTATION BY
THE ROADS FUND ADMINISTRATION
ICAM CONFERENCE .

2. Presentation Outline Institutional background
Rationale for debt financing
How we proceeded
Structure of RFA Bond
Soft Issues
Lessons learnt
Future 2

3. 1.0 RFA INSTITUTIONAL BACKGROUND
CREATION
In 2006 through an Act of Parliament.
VISION
Sustainable Financing for public road network
To economically, efficiently and effectively mobilize, manage and account for funds for construction, maintenance and rehabilitation of public roads in Malawi
MISSION

4. 2.0 RATIONALE FOR A BOND

5. 3.0 WHAT OPTIONS DID WE HAVE?
Lobby for increase in fuel levy to increase revenue base
MEDIUM TO LONG TERM
MEDIUM TO LONG TERM
Introduce additional source of revenue
Leverage on our current revenues to raise capital for rehabilitation projects
IMMEDIATE

6. 5.0 HOW WE PROCEEDED K10.0 BILLION
Identified the Project, including capital requirements
K10.0 BILLION
Dualisation of Area 49 – Parliament Roundabout Road Project
Construction of a Cloverleaf Interchange at Area 18 Roundabout

7. 5.0 HOW WE PROCEEDED
Solicited Request for Proposals in a bid to obtain a most favourable proposal. Six financial Institutions responded- banks and pension funds management companies.
Obtained - Letter of Consent from Ministry of Finance. NOT GUARANTEE
- Letter committing that there will be no policy changes that negatively affect fuel levy receipts
Opened an interest earning (at 91-day T-Bill less 5%) escrow account holding at least one quarter loan serving commitment at all times

8. 6.0 FEATURES OF THE RFA BOND
TENURE
5 years with one year grace period.
NO GOVERNMENT GUARANTEE
Fuel Levy revenue streams.
Letter of undertaking not to change fuel levy policy.
SECURITY
INTEREST RATE
FLOATING RATE- Referenced to the 91 day Treasury bill plus premium of 1.75%. Rebased at beginning of every quarter
FLOOR RATE
Latest available inflation rate plus 2%
CEILING RATE
NBS lending rate minus 5%- currently

9. 6.0 FEATURES OF THE RFA BOND
FEES
1.5 % upfront arrangement fees. One off K10.0m commitment fees.
K5.0m bond administration fees annually payable quarterly
Escrow Account
Funded with one quarter bond servicing commitment
Interest earning at 91 day t-bill rate minus 5%- to RFA
DRAWDOWNS
Draw downs in tranches only when invoice is due for payment.
REPAYMENT
Quarterly.

10. 7.0 SOFT ISSUES THE BOND PROVIDER WAS LOOKING FOR
GOVERNANCE
Assurance that the governance structures are working efficiently
Compliance with governing laws and regulations - financial institutions do not want to be part of badly procured projects (it is a reputational risk for them).
PROCUREMENT
All borrowing had to comply with the Public Finance Management Act and own establishment Act.
LEGAL MANDATE TO BORROW-
Assurance that there will be NO direct Board or shareholder actions that negatively impact on source of income which is the security for repayment
SUSTAINABILITY OF SOURCE OF INCOME 10

11. 8.0 LESSONS LEARNT The market has more than enough resources
Be transparent in the procurements of both the project and the financier

12. 9.0 LOOKING INTO THE NEAREST FUTURE
We see a future in raising capital on the market for infrastructure development
We intend to issue another higher value bond

14. THANK YOU ALL 14