SEC SANCTIONS GHANA TELECOM'S US$40M BOND ISSUE

Mergers, Acquisitions and Financial Results

After expressing its displeasure at the way the Ghana Telecom (GT), led by Databank, raised an amount of US$40 million through the issuance of bonds to expand and upgrade its network, the Securities and Exchange Commission (SEC), on Tuesday, had a meeting with the Chief Executive Officer (CEO) of GT, Mr. Frode Haugen and the Chairman of Data Bank, Ken Ofori Atta, to clear any misunderstanding.

After a thorough look at the documents for raising the US$40 million, SEC said it was satisfied with the documentation and therefore sanctioned the transaction afterwards. But it advised any institution and individuals to inform the SEC of any private placement in the market.

The capital market regulator, SEC, raised concerns about the way the transaction was shrouded in secrecy and wanted to see to it that the deal was transparent.

GT, in March, announced the procurement of US$40 million estimated at ¢360 billion in the form of bonds to expedite its network expansion and upgrading projects.

The amount is the biggest to be raised by a state-owned company in recent times to meet government's target of making telephone services accessible to all, especially those in the rural areas.

It is also to provide the company with additional capital to expand both fixed lines and mobile lines.

53% of the amount, which is $21 million, was raised locally whilst foreign companies acquired the remainder, estimated to be $19 million.

According to PNDC law 333, SEC has oversight responsibilities over all securities in Ghana and it empowers the SEC to make rules and regulations to guide the conduct of the securities market.

However, as at now, apart from the public issues, there are no rules and regulations on private placements where bonds are traded privately.

It is because there are no rules and regulations regulating this part of the market that raising of bonds like GT's has become a big issue.

The private placement of securities is now a gray area that can generate controversies.

In view of this regulatory gap, the SEC would soon issue market guidance note on private placement market as all other jurisdictions.

"In view of this gap, we are planning to issue market guidance note on private placement in Ghana as in all jurisdiction," the Head of Research and Marketing of SEC, Mr. Emmanuel Ashong Katai said.

In Nigeria, the securities regulator has a direct control over private placements. In the United States, any private placement transactions are to be filed with the US SEC.

Ghanaian Chronicle