Bond issuance for broadband network

Context

• Liquid Intelligent Technologies – Africa’s largest independent fibre, data centre, and cloud technology provider – was looking to raise capital to expand its digital services, particularly in markets with low digital penetration.
• The African Union, along with the World Bank, has set the goal that every African individual, business, and government will have internet access by 2030.
• Africa’s internet economy could be worth up to USD180 billion by 2025, but investments in infrastructure will be required to support this.

Stakeholders involved

• Investor: IFC is a member of the World Bank Group and uses capital and expertise to create markets and opportunities in developing countries.
• Company: Liquid Intelligent Technologies is a pan-African technology group with network, cloud, and cyber-security offerings across 14 countries.
• Bookrunner: JP Morgan was the bookrunner.

Problem

• The issuance was occurring in the middle of the COVID-19 pandemic.
• With a fixed broadband penetration network of less than 5%, internet access across Africa relies largely on mobile networks through providers such as Liquid Intelligent Technologies.
• Currently, only 22% of people in sub-Saharan Africa access the internet.
• Liquid Intelligent Technologies faced challenges obtaining finance due to regional uncertainties noted by Moody’s, such as exchange rate volatility and regulatory uncertainties.

Innovation

• IFC played an anchor role in Liquid Intelligent Technologies’ bond issuance, and subscribed to 16% of the bond issue, worth USD100 million. The total bond issue raised USD620 million.
• The bonds were issued on the Euronext Dublin, Ireland’s main stock exchange, in 2021.

Timeline

Results and impact

• The bond issue will allow Liquid Intelligent Technologies to expand access to broadband internet and digital and cloud services across Africa by refinancing debt and providing finance for capital investments in economies with low levels of internet penetration.
• The investment in the bond will help Liquid Intelligent Technologies free up capital and will contributed to continued growth of broadband access across Africa, whilst acting as a foundation for a faster and more resilient recovery from COVID-19.
• A 10% increase in mobile broadband penetration rates increases GDP per capita by 0.7%, as people and businesses can connect to markets and access financing through the internet.

Key lessons learnt

• When the IFC finances private sector initiatives, it can help bridge hindrances to economic growth, such as poor connectivity and low levels of internet penetration.
• The IFC backing was essential to shoring up investor confidence in the remaining 84% of the bond issuance, after the negative outlook and Moody’s downgrade of Liquid Intelligent Technologies to a B1 credit rating. The IFC backing was a factor in the issuance being 5.5 times oversubscribed.
• Foreign currency volatility is an ongoing risk for companies operating in emerging markets, particularly Sub-Saharan Africa. If not proactively managed, it can lead to stranded capital and customer churn, and can deter investors.