Nigeria’s Skye Bank has received a $150 million, five-year loan backed by remittances generated from Nigerians living abroad, according to a press release put out by the transaction’s participants.
This would be the first deal in Africa collateralized by any type of electronic money flows, but it is different from transactions that securitize diversified payment rates, an long-established funding source among EM banks.
"The structure is backed by formal remittances through Western Union, which is different from a diversified payment rights transaction which includes many different types of payments,” said Julian Turner, director of debt primary markets at Standard Bank, one of the deal’s bookrunners, along with Citi and African Export Import Bank.
Turner declined to name the other banks in the syndication.
Remittances are an economic force in Nigeria, with flows estimated at over $10 billion in 2010. “It’s a robust cashflow-generating source - over 50% of remittance payments to Sub-Saharan Africa are to Nigeria and over 50% of payments to Nigeria originate from the well-established Nigerian populations in the US and the UK,” Turner said.
Skye is a second-tier bank, ranking eighth in the country by assets. Neither the bank nor the transaction is rated. Deals backed by diversified payment rights, in contrast, are typically investment grade.
Turner said that apart from Nigeria, Ghana had potential in this sector. He added that South Africa already has the most developed structured finance market in the region, with many issuers of existing asset ABS and future flow is not necessarily a logical development from this platform. Nevertheless, for a smaller issuer with a distinct cashflow stream, it could be possible, Turner said.