In December 2022, officials from 49 African nations as well as hundreds of civil society and private sector business leaders convened in Washington, D.C. for the U.S.-Africa Leaders Summit, empowered by the promise of a revitalized U.S.-Africa partnership focused on economic growth and sustainable impact. In a speech addressing the Continent’s heads of state, President Biden vowed, “the United States is all in on Africa – and all in with Africa.”
In a groundbreaking transaction that closed on March 8, 2023, U.S. and international institutional investors, acting alongside African investors, mobilized USD $276 million. This financing will assist West African nations advance their development goals and deliver affordable housing to thousands of aspiring homeowners in the region, while also confirming the power of development finance institutions to sustainably crowd-in institutional investors.
The core members of the transaction deal team included MiDA Advisors as the originator and lead transaction advisor, Bank of America Securities, Inc. and Brean Capital as co-structuring agents; Bank of America Securities, Inc. as private placement agent; The Bank of New York Mellon as settlement agent and indenture trustee; CrossBoundary providing transaction advisory support; and a consortium of international and local law firms.
An Urgent Housing Need
From Dakar, Senegal to Abidjan, Côte d’Ivoire, some of the Continent’s fastest growing cities are located in West Africa. By 2050, nearly a billion people are expected to call West Africa home. The United Nations projects that three out of every four people added to the human population this century will be African. The combined stressors of a rapidly growing population and urbanization have led to a regional housing crisis that is both an issue of affordability and access. On the one hand, economic underdevelopment has left many low- and middle-income West Africans without the wealth to afford a home. On the other hand, regional banks lack adequate resources to supply affordable mortgages apace with rising demand. Banks in the West African Economic and Monetary Union (WAEMU) region, representing eight West African nations, for example, are able to satisfy only a fraction of the region’s demand for new mortgages each year.
The Caisse Regionale de Refinancement Hypothecaire (CRRH), a Togo-based mortgage refinancing organization operating across the WAEMU region, was established in 2012 to better meet the region’s housing needs. CRRH, through its mortgage refinancing solutions, provides local member banks with access to long-term liquidity that can be used to either issue or refinance mortgage loans at lower interest rates and longer tenors. However, access to long-term capital is in short supply in the region. As West Africa faces an urgent need for housing, a bold and innovative solution backed by Prosper Africa, a U.S. Government-wide initiative to increase trade and investment between African nations and the U.S. was identified Working with the U.S. Agency for International Development (USAID) through the INVEST initiative and the U.S. International Development Finance Corporation (DFC), this solution is helping to deepen private sector ties to the Continent and will help to close the gap in capital needed to meet local housing financing needs.
A Landmark Solution
The MiDA (Mobilizing Institutional Development in Africa) program was launched at the 2016 U.S.-Africa Leaders Summit as a USAID initiative to mobilize U.S. institutional investors to meet African infrastructure investment needs. The program expanded into a private sector transaction advisory firm, MiDA Advisors, which served as the originator and lead advisor on the landmark CRRH transaction that effectively blends private capital with development agencies’ catalytic resources. MiDA Advisors’ mandate was to structure an innovative financing that crowds-in institutional investors at scale to sustainably meet development objectives in Africa. Through this financing, a 17-year USD $217 million Eurobond was issued via a U.S. trust alongside a local currency bond equivalent to USD $57 million, for a total raise of USD $274 million from international and local institutional investors. The structure also includes a liquidity reserve facility that will help mitigate currency risk over the life of the financing.
USAID Invest and Prosper Africa provided technical assistance funding to support the transaction. The DFC provided a financial guarantee on the Eurobond issuance, carrying the full faith and credit of the U.S. Government, helping to secure an Aa1 rating from Moody’s rating agency. This is quite a unique accomplishment for an African private sector issuance in international markets.
This innovative financing unlocks mortgage loans for thousands of middle and lower-middle income borrowers across the member countries. Equally as important, the international bond issuance will introduce CRRH to a wide range of new investors in the U.S. and Europe. Using a DFC-guaranteed bond will help to familiarize these new investors with organizations in Africa such as CRRH. Over time, this may build confidence in more African institutions and allow them to access foreign financing directly, and more readily, without requiring the same degree of credit enhancement.
As U.S. President Biden wrapped up his U.S.-Africa Leaders Summit speech, he reasserted to Africa’s leaders, “you’re going to see us deliver our commitments — all of our commitments.” The support of U.S. government programs to advance the landmark CRRH transaction is a strong example of America delivering on these commitments, and how American and African stakeholders can partner to achieve shared prosperity.
