Home » Business » Fidelity Sets Up SPV for U.S $5 Million Bond

Fidelity Life Assurance of Zimbabwe Limited has setup a wholly-owned special purpose vehicle ring-fenced for the development and its $5 million bond issue. The sole purpose of the SPV Athena Estates (Private) Limited is to mobilise funding and service the proposed Fidelity Southview Park Residential Development.

On the back of the land bank and a guarantee by Fidelity Life Assurance of Zimbabwe Limited, the SPV is the Issuer of the $5 million bond. According to the group’s prospectus, the $5 million capital to be mobilised through the bond will fund the installation of the 11km 500mm bulk water pipe at a budget of $2,675 million and elevated water tanks with a capacity of 15 million litres at budget $2,325 million, a City of Harare pre-condition.

The two projects will satisfy land development permit conditions and this will enable commencement of land servicing. These developments are expected to accelerate the rate of stand pre-sales.

“Full cash receipts and deposits from stand pre-sales will be applied to follow-on major infrastructural works of water, sewer and electrical reticulation as well as the servicing of interest and capital of the bond,” said FLAZL.

The bond targets insurers, pension funds and other institutional investors.

“For the avoidance of doubt, the bond will be issued by private placement and will not be offered or issued to the general public,” said FLAZL.

Applications must be for $10 000 face value and thereafter in multiples of $5 000. The bond has been accorded Prescribed Asset Status by the Minister of Finance and is tradeable.

The bond is issued at par and redeemable in United States dollars at par at maturity. It has a three-year tenor at a fixed interest rate of 10 percent per annum, calculated on a 360-day basis.

The group has anchored its growth on the property development project confident it will deliver a $30 million windfall if all the 5 974 stands are sold. Southview Park, which is located in south-west Harare was launched in 2012 on land purchased from CFI Holdings Crest Breeders’ for $3,3 million.

The land area measuring 328 hectares will be divided into 5 974 x 240 square metre stands being sold for $10 500 or flexible payment terms spread over 60 months after the payment of a $3 750 deposit and monthly instalments of $143,42month.

The spread can be 10 years at $89,20 per month.

For this year alone, if 3 500 stands are sold, the group will have a total $32,37 million as proceeds but the total income would get to $34 million after accounting for $4,25 million interest income and taking out $2,62 million insurance. Automatically, the group will offer a loan protection policy and free funeral cover to all who purchase on instalments.

The group said the cost of developing the stands would be about $11,3 million while the group expects a net profit of $21,15 million. If this is achieved and profitability remains at current levels then the group’s bottomline would hit the $30 million mark.

Source : The Herald