Raise Capital

Raise Capital

Overview

Raising debt capital on the ESX allows both the public sector and corporations access to a wider pool of investors to raise capital efficiently in a regulated market. Debt capital markets provide governments with a sustainable means to finance budgetary needs as well as invest in productivity boosting long term infrastructure projects that tend to benefit the general population in the long run through the issuance of government bonds.

Corporations issue bonds to the public in the fixed income market to raise capital for their operations and long-term capital expenditures as an alternative to issuing equity and without having to pledge collateral. Effective debt markets are especially useful for companies when high-cost, large-scale projects that are traditionally long term – and usually out of scope for bank loans – need financing. Additionally, the presence of an organized fixed income market adds another funding option for firms in addition to listing equity shares and can help improve their capital structure through an optimal mix of debt and equity to minimize the cost of capital while enhancing shareholder value.

Fixed Income Listing Process

ESX facilitates a listing environment ensuring proper and timely processing of applications to facilitate efficient listing of fixed income securities onto the exchange. This will ensure that adequate disclosure of full and material facts in listings related applications is in compliance with the Proclamation, Directives of the ECMA and other relevant laws and statutory requirements.

Applications for fixed income securities listings include:

  • Listing of Securities issued by the Government of Ethiopia
  • Listing of Corporate and Supranational fixed income securities.
  • Any other methods that may be approved by the ESX from time to time.

Listing of corporate debt securities on the ESX will occur in a standardized series of steps and covers the following main steps.

  1. Eligibility Requirements: Issuers interested in listing bonds on the ESX need to meet eligibility criteria set by the exchange. These criteria may include financial health, corporate governance standards, and compliance with relevant regulations.
  2. Engage Advisors: Issuers will engage financial and legal advisors to assist in the listing process. These advisors can help ensure compliance with listing requirements, guide through documentation, and provide necessary expertise.
  3. Discussion with ESX fixed income listing department: issuers will notify ESX to discuss the planned issuance and create alignment on the listing procedures.
  4. Submission of application for ECMA: in line with applicable directives of ECMA issuance of corporate debt securities that are subject to registration by ECMA has to be registered before an application for listing is made to ESX.
  5. Submission of Application: The issuer submits a formal application for the listing of corporate debt instruments to ESX Fixed Income Listing Department of. The application includes all required documents, such as the prospectus, offering circular, and relevant legal and financial disclosures.
  6. Due Diligence: ESX conducts due diligence on the issuer’s financial standing, legal structure, and the terms of the bond issuance. This is essential for transparency and investor protection.
  7. Approval: If the review is successful, the application goes before the Fixed Income Market Committee of ESX for approval. The committee assesses whether the issuer and the bond issuance meet the exchange’s listing standards.
  8. Public Announcement: Upon approval, the ESX makes a public announcement regarding the listing. This announcement includes details about the security, such as the terms, maturity, and interest rates.
  9. Listing and Trading: After the public announcement, the securities are officially listed on ESX, and trading can commence. Investors can buy and sell these securities through the exchange.
  10. Ongoing Reporting and Compliance: Issuers are required to adhere to ongoing reporting and compliance requirements set by relevant ECMA directives and ESX listing rules. This includes providing regular financial disclosures, notices of material events, and other relevant information.

Fixed Income Listing Rules

As a market organizer, ESX puts in place appropriate governance framework including a rulebook specific to the fixed income products listed and traded on the exchange to ensure credibility in the market. Listing rules are in place to assure the existence of an orderly market for raising capital in the primary market and to protect investors.

General Principles of the Listing rules in the Fixed Income market include:

  • Accurate, full, equal, and timely public disclosure of information is made to all holders of securities and the general public regarding the activities of an Issuer.
  • To ensure that all parties involved in the dissemination of information into the marketplace, whether directly to holders of securities or to the public, observe the highest standards of care in doing so.
  • To ensure that all holders of the same class of securities of an Issuer are accorded fair and equal treatment in respect of their securities.
  • The listing requirements, and in particular the continuing obligations, promote investor confidence in standards of disclosure and corporate governance in the conduct of Issuers affairs and in the market as a whole.