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Monday, December 5, 2022

Launch Partners

PODCAST: A case study on South Africa’s first listed sustainability Sukuk

Agrarius Sustainability Engineered listed its inaugural Sukuk worth ZAR500 million (US$28.15 million) on the Johannesburg Stock Exchange (JSE) on the 28th October 2022. ISFI spoke to Fatima Vawda, the managing director of 27four Investment Managers, to learn about this issuance.

Agrarius is a division of 27four that focuses on investing in the agricultural sector. The issuance, which is under Agrarius’ ZAR10 billion (US$563.07 million) sustainability-linked Sukuk program, will finance between five and 10 sustainable and green projects on the agricultural sector value chain.

27four’s credit committee has approved projects that range from the extraction phase to distribution, consumption, manufacturing and processing.

“One of the transactions that has just been approved is in the potato space where we are supporting a potato farmer who has an offtake agreement with a global multinational potato chips maker,” Fatima told ISFI.

The issuance was the first local currency Sukuk and the first sustainability related Sukuk to list on the JSE. It priced at 4.75% and was oversubscribed by ZAR20 million (US$1.13 million) with the final bookbuild allocated to seven institutions comprising fund managers, retirement funds, medical aid funds and insurance institutions, as well as 32 individuals and family offices. Half of the investors are conventional investors.

Agrarius has received significant interest from developed markets and other emerging market countries that manage sustainability indices in the debt space, according to Fatima,.

Fatima shared that the with the low face value of the facility, 27four expects the Sukuk to be very liquid. Since the time of the podcast recording, the JSE has informed Agrarius to adjust the minimum nominal amount of the Sukuk offering to ZAR1 (0.56 US cents) from ZAR10,000 (US$563.1), as its debt market’s mark-to-market system cannot facilitate denominations of ZAR10,000. The reduced face value of the facility may add further to its liquidity.

In addition to further issuance under the ZAR10 billion Sukuk program, which does not have a specific timeline, 27four is looking to issue a dollar-denominated listed Sukuk in an offshore jurisdiction in 2023, Fatima shared.

This is an excerpt from an interview with Fatima Vawda, the managing director of 27Four Investment Managers. Listen to the full discussion on the Agrarius Sukuk on IFN OnAir.

Agrarius Inaugural Sukuk

ZAR500 million (US$28.15 million)
28th October 2022
Summary of terms and conditions
Issuer
Agrarius Sustainability Engineered
Circulation agent
27four Investment Managers
Size of issue
ZAR500 million (US$28.15 million)
Mode of issue
Bookbuild
Purpose
Tho fund projects on the agricultural value chain
Tenor
Three years
Issuance price
100%
Profit rate
4.75%
Payment
Annual
Currency
South African rand
Maturity date
The 28th October 2025
Dealer(s)
Moore Debt Advisory
Debt sponsored(s)
Questco Corporate Advisory
Settlement agent(s)
FirstRand Bank
Governing law
South African law
Legal advisor(s)/council
Johan Fourie, in-house corporate legal advisor to 27four Investment Managers and the issuer
Islamic structure
Wakalah
Listing
Johannesburg Stock Exchange
Shariah advisor(s)
Shariah Advisory Committee of 27four Investment Managers
Tradability
Yes
Face value/minimum investment
ZAR1 (0.56 US cents)
Investor breakdown
Seven institutions comprising fund managers, retirement funds, medical aid funds and insurance institutions and 32 individuals and family offices

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