Bond Exchange secures growth capital

11 September 2008

The Bond Exchange of South Africa (Besa) has secured the necessary approvals in support of its rights issue to raise new capital, with underwriting partners that include the New Zealand Exchange, local banks and other financial institutions securing the transaction.

“We are tremendously excited by what the fresh capital injection and new partners will deliver for our business,” Besa chief executive Garth Greubel said in a statement last week.

“The effect of this transaction is to significantly strengthen our shareholder and capital base, with certain strategic partners also being represented on the board, while maintaining our commitment to the bond market and existing shareholders.”

The rights issue is the second phase of Besa’s development strategy, following the exchange’s demutualisation in 2007.

After the rights issue, at least 30% of Besa’s equity will be held by strategic partners, providing valuable support in order to execute the exchange’s vision of building better markets. Formalities relating to the transaction will be concluded at Besa’s annual general meeting towards the end of September.

BondClear project

According to Besa, a project that will contribute significantly in driving growth is BondClear, a new central counterparty clearing house that it is presently establishing. BondClear will provide clearing and central counterparty (CCP) services to South African financial markets, initially for interest-rate derivatives listed on the bond exchange.

“We are optimistic about BondClear, in which NASDAQ OMX is a direct shareholder,” Greubel said. “NASDAQ OMX is one of the world’s largest exchange companies, with trading technology capabilities across six continents.”

Shareholder and market support for the rights, the BondClear project and other strategic initiatives that Besa is undertaking have been positive, while company management has already received irrevocable commitments in writing from shareholders, in excess of the necessary requirements, approving the capitalisation transaction.

Strong market performance

According to Besa, these initiatives are being undertaken against the backdrop of strong market performance in the exchange’s core bonds franchise.

Annual bond market turnover topped R13.8-trillion in calendar 2007. During 2008 bond turnover surged, with a record monthly figure of R1.486-trillion reported in February.

This has since been consistently exceeded from May through to August, when turnover reached a new record R1.956-trillion for the month. It is anticipated that turnover will top R17-trillion for 2008, representing an annualised velocity of 28 times market cap.

Besa now faced one of the most exciting and ambitious phases in the company’s development as an exchange, Greubel said.

“Our new capital will leave us well positioned to drive value through our existing core business and extend our set of products and services to financial market participants, as well as accelerating financial market infrastructure development in South Africa,” he said.

“We are excited by what the future holds for us as a business and the positive contribution it will make towards strengthening competition in South African financial markets.”

SAinfo reporter

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