Who Issues Bonds?

The entities that may issue Bonds are as follows: The State and Limited Liability Companies.

Reasons for issuing Bonds

Companies opt for financing through issuing Bonds for a number of reasons including training and expansion projects of the companies whereby there is a return on investment after 1 year, financial restructuring and diversifying financing alternatives.

Amount of Financing through issuing Bonds

The State may issue bonds (called Treasury Bonds) up to the amount stipulated for this purpose in the State Budget, whose conditions of issue are regulated by Ministerial Order of the Ministry of Economy and Finance. Entities that are public limited liability companies may issue bonds (called Corporate Bonds) up to the value of their share capital inscribed in the last Balance Sheet and Income Statement, and their issue is subject to the authorisation by their General Meeting, or their Board of Directors as stipulated in their Articles of Association.

Conditions for bond issue

The conditions for bond issue are previously established in its issue, in a document designated as Technical File for Issue, which contains:

• Amount and Term of Issue;
• par value and subscription value of the bond;
• Nature of the bonds (bearer or registered);
• Representation of the bonds (bearer or book-entry);
• Interest rate and periodicity of payment;
• Loan repayment modality;
• Fiscal Regime; Registration of Bonds;
• Financial Settlement Conditions;
• Responsible Financial Institution;
• Other relevant conditions.

Who buys Bonds

Bond issue can be placed for subscription to a predetermined range of investors (Private Offering modality) or to an indeterminate range of investors (Public Offering modality). Bond issue can be placed with investors, simultaneously in the Private and Public Offering modalities, in which case Bond issue as a whole is considered to be a Public Offering.

Issue of Bonds by Private Offering

Bond issue by Private Offering is subject to authorisation by the company itself (General Meeting, Board of Directors as previously mentioned).

Issue of Bonds by Public Offering

With the exception of the State, public offerings by companies or other entities are subject to prior authorisation by the Bank of Mozambique, in its capacity as the Market Supervisor of Securities.

Prior to the launch of a Public Offering of bond issue, the companies must submit to the Bank of Mozambique, through a financial institution, a set of documents consisting of:

• Copy of the minutes of the decisions or resolutions of the issuer's governing bodies;
• Updated copy of the issuer's articles of association;
• Commercial registration certificate;
• Management reports, accounts, opinions of the supervisory bodies and legal certification of accounts of the issuer, referring to the last years.

If the Public Offering for bond issue is accompanied by any advertising campaign, the advertising material must also be authorised by the Bank of Mozambique before it can be disclosed to the public. Once the Bank of Mozambique grants the authorisation to launch the Public Offering, companies may place bond issue to subscription by the general public, through a financial institution or syndicate of financial institutions.

Registration of Bonds in the Central Securities Depository

On the date of bond issue, companies register the issue with the Central Securities Depository, and the financial institutions register the bondholders.

Admission to listing on the Stock Exchange

Bond issue may be admitted to listing on the Mozambique Stock Exchange (BVM), and companies must comply with a set of requirements:

• Financial nature (market capitalization, equity, publication of accounts);
• Legal nature (legal compliance of companies, legal compliance of securities);
• Nature of the market (dispersion by the public, obligation to provide information). The admission to listing on the stock market for issuing bonds offers to the companies issuing them a set of advantages: Credibility of the companies;

Higher visibility of the companies; Share appreciation potential; Greater confidence with investors; More favourable tax regime.

Companies promote the listing on the stock market of its bonds, the advantages that are inherent:

• Credibility of the company;
• Increased visibility of the company;
• Greater confidence among investors;
• More favorable tax regime.

Other financing alternatives

In addition to bond issue, Companies can obtain financing in the Capital market, through issuing Shares and Commercial paper.