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TechCabal Daily – MAX kicks off $22million bond ride

Alexander Onukwue 29th September 2020

Nigerian mobility startup MAX is raising money for the next level of its operations by issuing bonds to private investors. The company announced yesterday that it has issued ₦400million (~$880,000) as the first series of a ₦10billion ($22million) bond program.

It is probably the first time a startup in Africa’s mobility sector has issued a bond. Companies can sell bonds when they need to raise money but are (a) reluctant to give out more equity to private investors, and are (b) not ready to become a public company. We can infer two things about this ₦400million bond from MAX’s communication:

It was distributed to pre-selected investors, which may or may not include MAX’s existing investors (like Alitheia Capital and Novastar Ventures) and banks. This party wasn’t for all comers.
It is offered as 1-year fixed-rate notes, implying investors are expecting a fixed return for the 12-month period.

MAX says the bond received “strong interest from
highly reputable local and international fixed income investors.” We don’t know who these are because it is a private issuance unlike, say, an IPO. Nigeria’s Securities and Exchange Commission does not regulatebonds issued by private companies. MAX says it worked with DLM Advisory, an investment bank regulated by SEC.

The startup has taken up eye-catching projects in the last few months, including the deployment of its electric motorcycles and a transport digitization project with a Nigerian southwestern state. With more cash coming in, we could be in for a few more project announcements from the yellow-black bikers.

Some of Nigeria’s biggest banks – Union Bank, UBA, GT, Access, and Zenith – paid less interest on customer deposits in the first half of 2020 than they did last year, despite an increase in deposits. How?
Why?!

It appears the anomaly (can we call it that?) can be traced to the Central Bank of Nigeria’s increase of the loan-to-deposit ratio in July 2019. As you may recall, CBN gave banks a September 2019 timeline to meet a 60% LDR mark, then extended it to 65% by December 2019. Apparently, the injunction on banks to give out more loans has affected what a customer’s deposit yields while idle in his/her account.

So how are banks faring on the loans front? This Stears piece is a good guide into the lending prowess of the so-called FUGAZ tier of Nigerian banks, based on their Q2 financial statements.

Bukky George is being guided out of the leadership of HealthPlus, the pharmacy chain she founded two decades ago. As CEO, she has overseen the company’s growth to over 90 stores across Nigeria, raising it to a pedestal that only a handful of other brands in the sector have attained.

Her ownership tusslewith Alta Semper Capital, a private equity firm that bought a controlling stake in 2018, suggests a falling out over unmet growth KPIs. While the George-backed management contests the PE firm has unfairly held back funding and is due to exit the investment in 2023 anyway, the firm insists its installation of a “Chief Transformation Officer” to take over George’s duties is purely in the interest of the business and its shareholders.

Alta is reportedly moving to control company accounts and offices. Management hopes to press on with the resistance. In this battle for rights, what will be left of HealthPlus? We hope to dig in and find out.

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TechCabal Daily – MAX kicks off $22million bond ride

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