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(Ecofin Agency) – The West African Development Bank (BOAD) has initiated a new securitization effort, targeting CFA28 billion ($47.7 million) with an interest rate of 9.5%. This follows a successful CFA150 billion ($255.6 million) securitization last year, which had a lower rate of 6.1%.
The new securitization, available until September 6, 2024, spans 62 months with semiannual payments. This results in an effective annual rate of 9.73%, according to Ecofin Agency calculations. The higher rate could attract investors, especially given that inflation in the region is approaching the 3% target after recent highs.
This move is part of BOAD’s broader strategy to raise over CFA500 billion to support its “Djoliba 2021-2025” plan. This plan aims to position the bank as a leading force in fostering sustainable integration and transformation in West Africa. Serge Ekue, the bank’s director, noted in May that more securitization efforts are planned, including those targeting the residential real estate sector, potentially through Residential Mortgage-Backed Securities (RMBS). Some funds will also support BOAD’s mortgage subsidiary, CRRH-WAEMU, led by Yedau Ogoundele.
The BOAD is converting various public and private sector receivables within the WAEMU region into cash to strengthen its balance sheet. The securitized assets include receivables totaling CFA150 billion, with CFA4 billion currently in default. The receivables, rated AA+ by GCR West Africa for the Mezzanine B tranche, feature interest rates from 4.50% to 10.25% and maturities ranging from 2026 to 2031. Many of these are linked to public projects.
Despite its appeal, the high interest rate raises questions about how the bank will deploy the new funds. There are concerns about the terms of new loans for regional states and economic actors.
In a May interview, Serge Ekue addressed these concerns, explaining that the previous 6.1% rate allowed the bank to achieve a net benefit equivalent to about 300 to 400 basis points through improved balance sheet management. BOAD plans to combine the new resources with concessional financing to minimize risks and reduce loan interest rates for regional projects. This mixed-finance approach is crucial in a high-interest environment, where regional investors are currently demanding up to 10% yields for short-term sovereign securities.
With these new funds, BOAD aims to further expand its investments, continuing to increase its disbursements in sectors like energy and water, finance and insurance, hospitality and tourism, and heavy industries and urban infrastructure.
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