FUNDING FRONTIER FUTURES

“Since 2014 Frontera Capital raised close to USD 1 billion in
sub-Sahara Africa, Central America & Emerging Europe”

Frontera Capital has managed and executed 20 transactions since 2014 with an accumulated notional of close to USD 1 billion. Transactions ranged in size from USD 7.5 million to USD 700 million.

Sovereign transactions represented 75% of the deals concluded since 2014. The split between sovereign and corporate deals is expected to level over time as Frontera Capital has added and continues to add credit analysis expertise across a range of industries.


Since 2014, of the 20 transactions, 8 were in sub-Sahara Africa, 3 in Central America and 9 in Emerging Europe. This Africa-bias reflects the previous experience of the Managing Principal and the team on the continent. However, even though sub-Sahara Africa will continue to be a very important focus for Frontera Capital, the region’s relative importance is likely to decrease over time as the team is looking to conclude current transactions in other frontier market regions of Central & South America; the Caribbean; Eastern Europe; Central, South & South East Asia and the South Pacific.

The distribution of transactions has been relatively diverse, by both Investor-type and Investor-location. Specifically, while the more traditional sources of capital inflows to frontier markets from Development Finance Institutions (DFI) and bank syndications accounted for about half of the deal funding, the ‘new’ funder of these transactions were institutional investor and pension fund asset managers. In addition, the geographic location of investors was also widely and evenly distributed, with roughly a third from each of Africa, Europe and North America.


Executed Transactions | Angola

Transaction Rationale:

  • The Govt. of Angola sought a USD700 million facility to start financing the reconstruction of two key trunk roads of c1100 km requesting the Development Bank of Southern Africa (DBSA) to lead arrange the initial funding as a loan directly to the Ministry of Finance.
  • The transaction provided investors access to hard currency, sovereign fixed income assets in Angola at an attractive yield pick-up to alternative African and emerging market debt.

Transaction Terms:

  • Instrument: Long Term Hard Currency Bilateral Loan
  • Borrower: Govt. of Angola via Ministry of Finance
  • Lenders: DBSA and international investors
  • Notional: USD700 million
  • Tenor: 10-years, with 2 year grace period
  • Spread: 625bps over 6-month LIBOR
  • Principal Repayment: Amortizing, after the grace period
  • Coupon Payment: Semi-annually

Executed Transactions | Sierra Leone

Transaction Rationale:

  • A dedicated frontier markets asset manager sought exposure to Sierra Leone’s high interest rates and to prospective Leone (SLL) appreciation after a successful initial exposure to the country.
  • Foreign investors cannot buy local Treasury Bills in Sierra Leone. Thus, Frontera Capital offered the investor the possibility to secure exposure to SLL rates via a Credit-Linked Note (CLN) linked to a bank deposit in a local bank.

Transaction Terms:

  • Instrument: Certificate of Deposit
  • Primary Obligor: Ecobank Sierra Leone Limited
  • Notional: USD 11.4 million
  • Tenor: 1-year
  • Currency: Sierra Leone Leone (SLL)
  • Principal Repayment: At Maturity
  • Interest Payment: Annual
  • Structure: A USD-denominated Credit-Linked Note (CLN) linked to the Certificate of Deposit

Executed Transactions | Georgia

Transaction Rationale:

  • A dedicated Frontier Markets asset manager sought exposure to Georgia’s post-depreciation, falling inflation and rising Lari (GEL) real interest rates but was not able to source sufficient local assets via the regular primary auctions of govt. debt for the desired risk exposure.
  • Frontera Capital thus negotiated with Georgian financial institutions to secure a Private Placement exposure to qualifying local assets in excess of available primary and secondary markets offering a variable maturity exposure to GEL rates.

Transaction Terms:

  • Instrument: Collateralised FX forward trades and bank deposits
  • Issuer: Regulated Georgian Financial Institutions 
  • Notional: USD 15 million
  • Tenor: 5.17-years Average Life (Maturity 25 October, 2021)
  • Currency: The Georgian Lari(GEL)
  • All-In Yield: 12.5%
  • Principal Repayment: At five years and at maturity
  • Coupon Payment: Every six months (April and October)
  • Structure: Credit-Linked Note (CLN) linked to Republic of Georgia

Executed Transactions | Nicaragua

Transaction Rationale:

  • A dedicated Frontier Markets asset manager sought exposure to Nicaragua’s high real interest rates ‘guaranteed’ by Nicaragua’s historically stable crawling-peg currency regime to the USD, but was not able to source the local assets in public markets for the desired risk exposure.
  • Frontera Capital thus negotiated with the Nicaraguan Authorities to source sovereign assets from the National Social Security Fund for the client to secure a Private Placement exposure of variable (5-year and 10-year) maturity to Nicaraguan Cordoba (NIO) sovereign-guaranteed debt that was not accessible in either primary or secondary markets.

Transaction Terms:

  • Instrument: Bonds of the Empresa Administradora de Aeropuertos Internacionales (EAAI)
  • Issuer: EAAI, a wholly owned State-owned Enterprise (SoE) by the Govt. of Nicaragua
  • Notional: USD 37,8 million
  • Tenor: Ten Years (Maturity 8 April, 2024)
  • Currency: US Dollar (USD)
  • All-In Yield: 8,25%
  • Principal Repayment: At maturity
  • Coupon Payment: Every six months (April and October)
  • Structure: Credit-Linked Note (CLN) linked to bonds issued by EAAI

Leo WinspearTransactions