FedCo sets GSE Commercial Paper ball rolling, with GH¢72.5m of GH¢200m raised

In February 2024, the Securities and Exchange Commission (SEC) approved the Commercial Paper Issuance and Admission Rules. This approval recognizes commercial papers (CPs) as eligible instruments for fund managers.

The CP market aims to help companies with operational records. It provides cost-effective, short-term liquidity ranging from 15 to 270 days. This market is expected to be an alternative to traditional bank lending.

At the listing ceremony, GSE Managing Director Abena Amoah praised the issuance. She called it a "bold and strategic step" and commended FedCo’s leadership.

“This issuance shows your financial discipline and confidence in Ghana,” she said. “It builds trust, transparency, and taps into a broader investor base.”

The transaction is seen as a breakthrough for Ghana’s capital market. It could ease pressure on bank lending by diversifying funding sources.

FedCo's issuance attracted significant interest, achieving a rate of 182-day Treasury bill rate plus two percent. James Avedzi Klutse from SEC expressed hope that FedCo would meet its debt obligations.

FedCo is a Licensed Cocoa Buying Company (LBC). Since 2017, it has grown from holding 5.7 percent of market share to being the third-largest LBC in Ghana.

Its sustainability program supports over 41,000 farmers, improving lives for about 400,000 people nationwide. The company has invested over US$20 million in local communities.

FedCo is also diversifying beyond cocoa production. “We have set up an 18,000 rice mill operator,” said Managing Director Mariam Adamu-Zibo at the event.

“We are also establishing a cocoa processing facility,” she added. “While cocoa remains our focus, we aim to enhance agriculture in Ghana.”

The CP issuance offers a chance to strengthen Ghana’s financial markets amid limited credit availability for businesses. The SEC believes this will provide structured short-term debt instruments alongside existing bond and equity markets.

John Awuah from the Ghana Association of Banks called this development timely and necessary. He noted that investment options in the country are very limited.

“There is a strong demand for more investor avenues,” he stated. He emphasized that this issuance promotes transparency and accountability in financial reporting.

“By entering the market, we show our commitment to transparency,” Mr. Awuah explained. He believes commercial paper can help diversify portfolios and distribute credit risk among investors.

He also mentioned that the market will closely watch FedCo’s first tranche maturity in August 2024. A smooth redemption could build trust for future issuances.

“If we manage this well, we might raise even more than US$200 million,” Mr. Awuah concluded.