GB Auto, a leading automotive company in the Middle East and non-bank financial services provider in Egypt, announced that its subsidiary GB Lease has completed its second securitised bond offering of EGP 767m. Proceeds from the transaction will be used to deleverage GB Lease’s balance sheet to improve its liquidity position, create new borrowing limits with lender banks, and support the company’s future growth plans.
The offering consists of three tranches with tenors of 13, 36, and 60 months respectively with the first receiving a rating of AA+, the second AA, and the third A by Middle East Rating & Investors Service (MERIS). The structure of the transaction is as follows: The first tranche consists of EGP 203m, 13-month non-callable bond with a variable yield of 40 basis points (bps) over the net after tax return on 182-day Egyptian treasury bills (T-Bills).
The second tranche consists of EGP 353m, 36-month callable bond with a variable yield of 90 bps over the net after tax return on 182-day Egyptian T-Bills.
The third tranche consists of EGP 211m, 60-month callable bond with a variable return of 145 bps over the net after tax return on 182-day Egyptian T-Bills.
“I am very pleased that GB Lease’s second securitised offering received a strong rating from international agencies that reflects a high-quality portfolio of receivables that was built by experienced and prudent management,” said Raouf Ghabbour, GB Auto’s CEO.
Moreover, the Managing Director and Chairperson of GB Lease, Sherif Sabry, said: “We are pleased to successfully close the securitisation bond for GB Lease, issued as part of the continuous growth of the business.”
Established in 2008 and beginning active operations in the fourth quarter (Q4) of 2009, GB Lease falls under the umbrella of GB Auto’s financing arm, GB Capital. GB Lease is a top market player in Egypt, having ranked third in terms of market share at 10.63% at the end of 2018. Capital for Securitization Co was the issuer of the bond, which is backed by a portfolio generated by GB Lease, while the Commercial International Bank (CIB) and the Arab African International Bank (AAIB) acted as joint lead managers and joint bookrunners. The CIB, the AAIB, the National Bank of Egypt, and Banque Misr were joint underwriters, while Elderiny Partner was legal advisor and KPMG was the auditor for the transaction.
Pharos Holding for Financial Investments recommended raising the relative weight of GB Auto shares, adding that the price was negatively impacted by the transformation of the automotive market in Egypt when the custom tariffs were removed off European cars and consumers were hesitant to purchase prior to the price increase.
It added that the market evaluation is good, given it did not consider the full incentives potential of the company’s investments in the non-banking sector but rather was impacted by the automotive market sales further than the situation developments across other financing activities, including the securitisation bonds of EGP 767m.
A recent Beltone Financial report set the working value of GB Auto shares at EGP 7.6 per share and recommended buying, supported by the strong performance of the company in the first three months of the year.