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Mikopo Structured Credit Development Fund

About the fund

The Need

Combining SME and corporate needs for alternative sources of funding with investors’ desire for less correlated yield, direct lending continues its evolution into a viable fixed income alternative as well as the Barak Mikopo Fund’s longer-term financing focus. The Developmental Growth in Africa is now at a crucial level of alternative financing needs.

The Barak Mikopo Credit Development Fund arose from the need of Barak’s existing borrower base to expand business operations further than just working capital growth. The idea behind the Fund’s strategy is to complement Barak’s shorter-term trade finance activities with this medium-term growth focus, with the added benefit of asset-backed security financing.

The below points are what the Fund will primarily be addressing:

  • Warehouse Expansion
  • Machinery Growth
  • Processing Plants
  • Large-scale Equipment Financing
  • Acquisition Finance
  • Sale and Lease Back
  • Trade Financing with Tenors > 1 Year

Africa Medium-Term Development Structured Credit

  • The Barak Mikopo Fund (Mikopo meaning “Credit” in Swahili) focuses on providing asset-backed short- to medium-term trade, working capital and expansion capital finance to African small and medium enterprises (SMEs), in support of development.
  • The Fund’s objective is to generate sustainable risk-adjusted USD returns, targeting 13-16% per annum, on capital over the medium term (3 years), with investments that are supported by a pool of high quality collateral.
  • Credit and yield enhancement of the portfolio can be provided through a first loss underwrite: loan-to-value- approximately 80%; Barak’s conviction in ability to source quality deals is actionable through this structure. Gearing of up to 200% generates the equity enhancements as well as the profit warrants/options structure.
  • Key to fixed income type distributions is liquidity management as underlying instruments have varying maturities, all < 3 years. The open-ended structure renders investment and disbursement conducive to dividend distribution semiannually.
  • Active portfolio management is applied through a combination of fundamental research and quantitative analysis to identify short and medium term investment opportunities generating superior and sustainable returns. The research process combines a top-down and bottom-up analysis of global, regional and industry factors specific to each investment opportunity further supported by an in-depth analysis of each borrower’s underlying business and operational fundamentals. (In bold) Developmental factors are addressed on a case by case basis.
  • Barak is tapping into an opportunity set that lends itself to the investment objective: More than 50% of individuals in Africa have no access to formal financial institutions. Only about 30% of small and medium-scale enterprises, have access to credit from banks.* Development Finance seeds growth.
  • Barak’s goal is to help develop competitive trade and processing industries that optimally utilise and develop local and regional resources to supply domestic demand and increase participation in international trade. This can be achieved by expanding trading lines, production capacity and promoting value added expansionary processing activities in a manner that fosters economic inclusivity.

* Source: University of Stellenbosch Business School

Barak Mikopo Structured Credit Development Fund

50000000

Initial Target USD50 million Equity, USD100 million Senior Debt

5000000

Minimum Investments - USD 1 million, subscription monthly

365

Redemptions - Liquidity can be provided through a 365 day withdrawal notification and subject to a redemption fee. Equity lock-in period 3 years

Target Equity Returns – 12 – 16% p.a. Semi-Annually

Management Fee – 2% p.a. (payable monthly)

Performance Fee – 20% p.a. (payable quarterly)

Mikopo Structured Credit Development Fund Marketing Sheet

All the facts