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Côte d’Ivoire’s economy is one of the strongest in sub-Saharan Africa with an anticipated 2018 GDP growth of 7.6%.

In recent years the country has prioritised a comprehensive programme of economic reforms aimed at achieving a sustainable balance of payment position. One of the target areas in this reform agenda is the energy sector – a critical growth area for the country.

In this transaction, the government has restructured the debt of Société Ivoirienne de Raffinage (SIR), the national oil refinery, with a €577 million ($658 million) debt financing facility. 

The facility is in place to help SIR repay historical obligations on crude supply, provide access to longer debt tenures and reduce the all-in interest rate on its stock of debt.

The facility included both a Euro-denominated tranche (with a nine-year maturity) and a West African CFA franc tranche (with a seven-year maturity). The financing will enable SIR to upgrade its plant and to align it to international environmental emissions standards with a view to business expansion.

Resolution of electricity arrears

To highlight the importance of this project, the International Monetary Fund’s June 2018 country review noted: “Directors…encouraged the timely resolution of the electricity arrears accumulated by the public sector and looked forward to the SIR debt restructuring.”

To support the government’s drive to manage the debt sustainably of this vital company, the Africa Finance Corporation (AFC), the Sole Mandated Lead Arranger, and a London-headquartered specialist credit and political risk insurance broker, Texel Finance Ltd (Texel) – approached African Trade Insurance Agency (ATI) to provide comprehensive credit risk insurance cover on the transaction.

The project brings together two African multilateral institutions partnering to provide a viable solution to arguably one of the most pressing challenges facing African governments: access to competitively priced and long-term infrastructure financing.

This deal attracted a panel of African-based and international lenders proving that, if structured well, there is broad appetite for African debt. ATI’s insurance guarantees totalled approximately €255 million ($290 million) at the inception of the facility or around 44% of the outstanding facility.

Samaila Zubairu, President and CEO of AFC, commented: “Transactions like SIR are a core part of AFC’s mission of leveraging our status as a DFI multilateral financial institution with both public and private ownership and attract a wide range of private investors while also coordinating appropriate support from the public sector. We are therefore delighted with the part ATI and Texel played in providing insurance so as to broaden the pool of investors who could participate.”

Also commenting on the development, George Otieno, CEO of ATI, said: “This transaction is yet another example of the importance of both private-public partnerships as well as African institutions working together with international counterparts to bring workable solutions that address Africa’s infrastructure gap. New estimates by the African Development Bank places Africa’s infrastructure needs at $130 – 170 billion a year, with an annual financing gap of $68 – 108 million. If Africa is to meet its economic and social targets under such constraints, the continent and its institutions will have to continue to innovate, work together and with international counterparts to bring effective solutions to the table.”

In conclusion, Andy Lennard, Chairman of Texel said: “We are thrilled that this transaction was executed as it clearly demonstrates that there is appetite in the financial services market for this type of transaction both from not only a risk but also a financing perspective. The input and knowledge of all participants to make this work is evident from the amount raised and the calibre of the lenders.

"We believe that this type of structure can be replicated with the insurance market helping to provide support to reduce the funding gap that exists between the amounts needed for infrastructure projects and the present deficit. We hope that it is the first of many such initiatives.”