Ethiopia: Central Bank Gives Green Light to Habesha's PTA Loan
The National Bank of Ethiopia (NBE) issued a
letter of consent for Habesha Cement S.C. to access money that it has
secured from the Eastern & Southern Africa Trade & Development
Bank, known as the PTA, to realise its plan of erecting a plant by 2015.
"Immediately after reaching an agreement with the PTA, we applied to
the NBE and received a letter of consent, on September 18, 2013," Mesfin
Abi (Eng), CEO of Habesha told Fortune. "This process took us three
weeks."
Habesha and Ethiopian Airlines have become beneficiaries of a 90 million dollar loan from the PTA. The PTA approved a loan of a little over 50 million dollars to Habesha Cement back on August 22, 2013, after two months of negotiations.
Ethiopian's 40 million dollars is also a long term loan to be paid in around 12 years.
For Habesha, the loan repayment will end in seven years, but with a
short term repayment portfolio option. If Habesha can get a more
attractive financing agreement with another bank, it has the option of
paying back the PTA within two years and ending the contract.
What makes Habesha's case unique is that it stands out as the first local private firm to secure foreign loans. Attempts by several companies, including Access Resort, to get consent from the central bank for external loans, have failed.
Habesha was established in September 2008 with 30 founding shareholders. The company floated 600,000 shares to the public on September 18, 2008, with a value of 1,000 Br each. When the initial public offering was closed, Habesha had amassed over 16,000 shareholders - the largest base for a private company in the country.
Before approaching the PTA, Habesha attempted to secure a 1.5 billion Br loan from the Development Bank of Ethiopia (DBE), but failed. This forced it to try soliciting loans from other sources for erecting a cement plant in Holeta, 35km east of Addis Abeba, which will produce 1.4 million tonnes of cement.
"More than seven international banks have shown interest to work with us," says Mesfin. "We opted, however, for the PTA and also they gave a swift response to our request."
"The money doesn't come directly to us. Rather, the PTA will open a letter of credit for us and pay for our costs," Mesfin told Fortune.
Habesha expects this letter to be opened in October. Once the letter of credit has been opened, the role of the NBE will be limited to the registering of debts, according to Mesfin.
Habesha and Ethiopian Airlines have become beneficiaries of a 90 million dollar loan from the PTA. The PTA approved a loan of a little over 50 million dollars to Habesha Cement back on August 22, 2013, after two months of negotiations.
Ethiopian's 40 million dollars is also a long term loan to be paid in around 12 years.
What makes Habesha's case unique is that it stands out as the first local private firm to secure foreign loans. Attempts by several companies, including Access Resort, to get consent from the central bank for external loans, have failed.
Habesha was established in September 2008 with 30 founding shareholders. The company floated 600,000 shares to the public on September 18, 2008, with a value of 1,000 Br each. When the initial public offering was closed, Habesha had amassed over 16,000 shareholders - the largest base for a private company in the country.
Before approaching the PTA, Habesha attempted to secure a 1.5 billion Br loan from the Development Bank of Ethiopia (DBE), but failed. This forced it to try soliciting loans from other sources for erecting a cement plant in Holeta, 35km east of Addis Abeba, which will produce 1.4 million tonnes of cement.
"More than seven international banks have shown interest to work with us," says Mesfin. "We opted, however, for the PTA and also they gave a swift response to our request."
"The money doesn't come directly to us. Rather, the PTA will open a letter of credit for us and pay for our costs," Mesfin told Fortune.
Habesha expects this letter to be opened in October. Once the letter of credit has been opened, the role of the NBE will be limited to the registering of debts, according to Mesfin.
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