RMB in $20m cross-border collaboration for African construction projects

22-09-2017
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Rand Merchant Bank (RMB) has closed a new $20-million letter of credit and performance bond facility for BAM International, a wholly-owned subsidiary of the Royal BAM Group, the largest construction company in the Netherlands.

The facility will facilitate BAM’s construction projects in Ghana, Kenya and Tanzania, its key jurisdictions in Africa. It is required by BAM for demand guarantees, standby letters of credit, surety bonds and counter-indemnities for its projects in these countries.

The lenders to the facility are FirstRand Bank and its subsidiaries in Ghana and Tanzania, allowing for flexibility as each entity can issue the instruments as required.

FirstRand, through RMB, has implemented a master risk participation agreement (MRPA) with each of its subsidiaries to reduce complexity by facilitating issuance in-country and thereby reducing the time needed to transport the original documentation.

The MRPA allows for the subsidiaries to issue instruments in excess of their regulatory single obligor limit, which provides a competitive edge over other domestic banks. The guarantee facility is available for one year.

BAM, founded in 1869, has a strong presence in Europe and has invested in projects in African countries where FirstRand is also present. In Tanzania, for example, it is involved in the rehabilitation and extension of Kilimanjaro International Airport and the construction of Terminal 3 at Julius Nyerere International Airport in Dar es Salaam.

In 2017, RMB won a GTR Best Deals 2016 Award from the Global Trade Review (GTR) for the BAM transaction, an award it also won in 2014. The GTR Best Deals Awards reward trade, export, commodity and project finance transactions that represent the finest of this industry in terms of innovation, social purpose, clever risk mitigation and, most importantly, continued support to trade.