What is a Note Programme?

It is a when a company raises financing by issuing notes/bonds on the capital market which pay investors interest. Investors will earn a fixed or floating interest rate for the life of the programme which is usually 3-10 years.

What is an IPC?

  1. Interim certificates provide a mechanism for the client to make payments to the contractor before the works are complete.
  2. Interim payments can be agreed in advance and paid at particular milestones, but they are more commonly regular payments the value of which is based on the value of work that has been completed.

Who is NRFA/RDA and their involvement?

  1. NRFA
    • National Road Fund Agency, formerly known as National Roads Board (“NRB”) was established in 2002 to manage and administer the Road Fund. The NRFA has additional responsibilities to co-ordinate and manage various donor financed programmes. Amongst these additional responsibilities is that of management of the ten-year Road Sector Investment Programme (“ROADSIP”) which is the NFRA’s most ambitious programme.
    • ROADSIP consists of funds from fuel levies, loans from international banks such as  the World Bank, donor communities such as  European Union, DANIDA, NORAD, Japan, and Germany. ROADSIP I started under NRB in March 1998 and was scheduled for completion  in 2003 at a cost of approximately  US$520 million. During this period, concentration was on the core road network, which was estimated at 33,500km. The objectives of the programme are well defined in the ROADSIP II Bankable Document.
    • Prior to the formation of the three new road agencies, the NRB played the role of funding the agency/ies? Established under a statutory instrument and funded programmes from government departments. These were the Roads Department under the Ministry of Works and Supply as well as the Department of Infrastructure and Support Services under the Ministry of Local Government and Housing which played the role of implementing the agencies.
  2. RDA
    • The Road Development Agency is a statutory institution created through the Public Roads Act No. 12 of 2002 to provide for the care, maintenance and construction of public roads in Zambia. The functions of RDA are to plan, manage and coordinate the public road network in the country through the following;
      • carrying out routine and emergency maintenance of public roads through its employees or independent contractors;
      • conducting such studies as it may consider necessary for the development, maintenance and improvement of the road network in Zambia;
      • advising road authorities regarding the construction, rehabilitation and maintenance of roads under their jurisdiction;
      • providing guidance and technical assistance to road authorities;
      • receiving and considering reports from road authorities on their activities and preparing quarterly and consolidated annual reports;
      • recommending to the Minister the appointment of any person or institution as a road authority;
      • preparing and reviewing terms of reference and guidelines for road authorities including budget guidelines;
      • reviewing from time to time the status of road authorities and recommending appropriate action to the Minister;
      • making recommendations in relation to the sitting of buildings on road-sides;
      • in consultation with the NRFA, recommending to the Minister funding for development of new roads;
      • in consultation with the owners of property served by an estate road and the NRFA, determining the proportion of the cost of constructing and maintaining an estate road to be borne by such owners;
      • preparing and awarding contracts and certifying works for public roads;
      • reviewing design standards and classification of roads and traffic signs;
      • planning and co-coordinating the road network in the country;
      • enforcing axle load control;
      • enforcing road tolling on the core road network;
      • carrying out any other activities relating to roads which are necessary or conducive to the performance of its functions under the Act and the Road Sector Investment Programme (Road SIP II).

Why a road infrastructure programme?

  1. Infrastructure is an enabler for the economic growth of any country as it provides essential services required by all. Roads in particular are key to the social and economic development as they facilitate trade and increase access to markets both within the country and with neighbouring countries. The Zambian Government has realized the need for world class road infrastructure as an enabler to economic development, and has therefore launched road construction projects to various contractors both local and international.

What happens if government default or delay?

Africa Trade Insurance (ATI) have provided default Risk Cover. They will cover for Non-payment by the National Road Fund Agency under contracts funded by and assigned to Ulendo RINP Limited. NFRA will be expected to pay Ulendo directly under the discounted IPCs. This will ensure that investors funds are protected and sufficient funds are available to repay GuarantCo in the event of any political risk.

What is Per Annum Interest?

This simply means the annual interest rate on the loan i.e. 22 % per annum interest return on K1,000.00 will earn a return of K220.00 in 1 Year (subject to the relevant taxes).

Can I exit?

  1. Yes, the bonds will be listed on the LuSE and can be freely sold and bought through stock brokers on the market.

How safe is my investment?

  1. The investment is provides the following security features:
    • Floating charge of future loan book – the investors will have first charge over the receivables in the loan book
    • Default Risk Cover from ATI – will cover for Non-payment by the National Road Fund Agency under contracts funded by and assigned to Ulendo RINP Limited. NFRA will be expected to pay Ulendo directly under the discounted IPCs. This will ensure that investors funds are protected and sufficient funds are available to repay GuarantCo in the event of any political risk.
    • Liquidity Guarantee from GuarantCo – will provide a senior secured liquidity guarantee of up to the ZMW equivalent of USD 20 million to cover 1 semi-annual coupon payment. This will ensure that during the period in which ATI are called upon and coupon payments fall due, coupon payments will be made to investors.
    • Lien over Escrow Account – The escrow account where funds will be received will be pledged to investors and the custodian shall ensure that the funds are utilized for the intended purpose.
    • IPCs are issued post-performance and therefore have no performance risk

How is my interest rate priced?

  1. Interest rate on Zambian Kwacha is a floating rate based on the prevailing 182 Day Government of Zambia Treasury bill yield plus 250 basis points (2.5%).
  2. Interest rate on the United States Dollar is a floating rate on the prevailing LIBOR (London Interbank Offered Rate) plus 650 basis points (6.5%).

How interest calculated?

  1. Interest payable on the Notes shall accrue during each Interest Period at a Rate of Interest determined by the Calculation Agent on the following basis:
    • two Business Days prior to the first day of the relevant Interest Period (the “Interest Determination Date”), the Calculation Agent will determine the rate based on the weighted Average Yield for the most recent 182 days Government of Zambia T-Bill  issued no longer than 180 days before the Interest Determination Date and published by the Bank of Zambia; and
    • if for any reason such rate is not available, the Transfer Agent will apply the most recent Bank of Zambia Policy Rate issued no longer than 90 days before the Interest Determination Date and published by the Bank of Zambia.
  2. And the Rate of Interest applicable to the Notes during each Interest Period will be the sum of the Margin and the rate so determined.

How does this benefit me financially?

Investors have the opportunity to invest in an instrument of world-class standard and grade. Your investment is secure and offers above average growth. The notes have no charges or hidden costs that will reduce the value of your investment. The interest rates offered are above current bank rates and other local and global investment opportunities. Furthermore, your investment returns are above the inflation rate, ensuring your money is growing in real terms and increasing your purchasing power.

What will Ulendo do with my money?

Proceeds from the Note Issuance shall be used specifically for the purchase of Interim Payment Certificates issued to Road Contractors by NRFA;

What is a Special Purpose Vehicle?

  1. Special Purpose Vehicle/Entity – SPV/SPE
    1. Also referred to as a “bankruptcy-remote entity” whose operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset / liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.

How do I receive coupon payments and my principle upon a sale or redemption?

Coupons shall be received through the bank account details submitted in your application form or by cheque to the mailing address in the application form.

How can I redeem my money?

Ulendo RINP will be the first public offer of notes, which can be traded on the open market. This makes it possible to increase your investment size and to exit/sell your investment to get back your initial investment. Alternatively at the end of the note tenor your investment will be repaid to you