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Africa Finance Corporation is working on a potential synthetic asset-backed securitization, as the infrastructure lender seeks to boost its capacity to fund projects from railways to renewable power plants.
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Bloomberg News
Esteban Duarte and Emele Onu
Published Jan 15, 2025 • 2 minute read
(Bloomberg) — Africa Finance Corporation is working on a potential synthetic asset-backed securitization, as the infrastructure lender seeks to boost its capacity to fund projects from railways to renewable power plants.
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AFC is eyeing a deal linked to a pool of at least $500 million of loans, said Banji Fehintola, the lender’s head of financial services and a member of its executive board. The firm is assessing other details including what investors to target.
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“If you look at my closet for capital initiatives there are plenty of projects at the moment.” said Fehintola in an online interview Tuesday. “We have a team currently working on projects related to securitizations.”
Synthetic ABS are growing in popularity as a way for multilateral financial institutions to transfer the risk of loan losses to investors such as pension or hedge funds, who buy a credit-linked note. Unlike so-called cash securitizations, assets in a synthetic ABS stay on the lender’s books. Insurers also take part in the market, often by selling credit protection.
Increasing the use of securitization was among the recommendations included in a Group-of-20 report with the aim of boosting MFI lending capacity to address economic and financial challenges in emerging market nations. AFC is also exploring potential cash asset-backed securities, Fehintola said.
AFC earlier this week priced a $500 million perpetual hybrid bond. It is also looking to soon sell what it will be its inaugural transaction in the panda bond market, which allows international issuers to raise renminbi-denominated debt.
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The lender, which is already raising debt in currencies such as dollars and yen, plans to become a regular debt issuer in the Chinese currency.
AFC is expanding its funding sources as it engages with several large-scale infrastructure projects.
These include the Xlinks Morocco-UK Power Project to supply millions of British homes with renewable energy generated in the North Africa nation via underseas cables, and a US-backed railway linking Zambia’s mining belt with Angola’s Lobito port on the Atlantic coast.
The financings of those projects are being readied so they can be syndicated by group of banks, said Fehintola.
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