Dutch investment firm, Arise BV has made a $75 million perpetual non-escalating more Tier 1 (AT 1) capital investment in Ecobank Transnational Incorporated (ETI) Plc, boost its position as a major investor in the finance-holding group.
Ecobank stated that the additional investment would be used for its general corporate purposes which will include loan growth and strengthening the capital buffers of profitable subsidiaries in two of the group’s cornerstone regions, Francophone West Africa and Anglophone West Africa.
The Basel III compliant instrument is the first AT1 instrument issued by ETI and regarded as a landmark transaction in the sub-Saharan Africa region.
According to ETI, the investment by Arise, a leading equity investor in financial institutions in Sub-Saharan Africa and one of ETI’s existing major institutional shareholders, demonstrated the support, commitment and capacity of Ecobank’s international shareholder base.
The group stated that the investment would optimize and improve its Tier 1 capital by $75 million.
Additional Tier 1 capital is ordinarily not common equity but it is eligible for inclusion in equity base.
AT1 capital is sometime structured as contingent convertible or hybrid security, with perpetual term and convertible clause.
Arise BV had in 2019 acquired International Finance Corporation (IFC)’s 14.1 per cent equity stake in ETI, thus becoming a major institutional investor. Arise is owned by FMO, Norfund, and Rabobank.
Group Chief Executive Officer, Ecobank Transnational Incorporated (ETI) Plc, Ade Ayeyemi said the investment by Arise was a testament to continued support and confidence from the group’s shareholders as well as their commitment and belief in the management strategy.
He reiterated that the group remained focused on executing its strategy to deliver value to shareholders and excellence to customers.
“Indeed, in addition to improving our double leverage ratio, it is also a good boost for the firm and its staff,” Ayeyemi said.
Chief Executive Officer, Arise BV, Deepak Malik noted that ETI was his firm’s primary banking investment in Francophone West Africa and Anglophone West Africa.
“We are very supportive of ETI’s growth ambitions and its ability to increase financial services to agriculture, small and medium enterprises (SMEs) and retail customers.
Our investment will also strengthen the balance sheet of ETI and provide additional risk capital,” Malik said.
The AT1 investment followed ETI’s $350 million subordinated Sustainability Eurobond issued in June 2021 which was very well received by international investors across multiple continents.
The Eurobond, which qualifies as Tier 2 capital, is listed on the London Stock Exchange.
IFC and its wholly-owned subsidiary, IFC Asset Management Company had in June 2019 reached advanced discussions to sell their equity holdings in ETI.
IFC and IFC AMC then entered into a Share Purchase Agreement with Arise B V for the sale of the 14.1 per cent equity stake in ETI.
Arise BV is a leading equity investor in financial institutions in Sub-Saharan Africa and its mandate is to capitalize and stimulate growth across all financial services sub-sectors and within SSA.
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