THE issuance of the Chipolopolo bonds is an innovative idea and if properly structured, we will in the next 10 years see a financially independent Football Association of Zambia (FAZ), says a financial analyst, Brian Tembo.
And Tembo advised FAZ to establish a sinking fund to avoid debt distress.
Last Saturday, the FAZ councillors approved the issuance of the Chipolopolo bonds to enable the association become financially independent.
The Chipolopolo bond is a 10-year project designed to raise US$10 million (about K120 million).
A bond is a debt instrument created for the purpose of raising capital or a fixed income instrument that represents a loan made by an investor to a borrower.
In an interview yesterday, Tembo, the former Lusaka Stock Exchange (LuSE) chief executive officer, said it would be unfair to predict the Chipolopolo bond as a failed project before seeing the actual document.
“The FAZ idea of raising capital through issuance of bonds is a sound idea, very innovative and I support it. What is important is to identify cash flow and lock them into a particular investment.
“Baobab School is one institution that used this method to raise funds for the expansion of the school and results can be seen. A bond is a debt so FAZ requires financial discipline to meet the target of the project,” he said.
Asked whether FAZ will be able to attract buyers after posting a K17, 584,847 deficit as at December 31, 2018, Tembo said the issuance of bonds did not necessarily depend on a positive balance sheet as it was a long term investment and other strategies can be used to finance the project.
“Investors have always looked at a long term investments, so depending on the placement document, investor institutional or public will be able to buy the bonds. One of the strategies FAZ can use is to have an Underwriter (an agent who will sell the bonds on behalf of FAZ and assume the risk) such as a bank. It will be an opportunity for the association to list on LuSE which is happening with European Clubs,” he said.
But Economic Association of Zambia president Lubinda Haabazoka said Chipolopolo bond was a risk as the association’s balance sheet does not show a positive outlook, which indicates inability to pay back the debt.
“At the moment, it is a wrong move as FAZ has no assets to finance these bonds. Gate takings and sale of replicas among others as a means of raising capital to repay these bonds is not enough because it’s not always that a stadium will be filled to capacity. The source of repayment does not look 100 percent viable and the institution can incur losses,” Haabazoka said.
FAZ president Andrew Kamanga said the money raised for the bonds will be used to employ full-time top notch coaches for various national teams, among others.
FAZ is optimistic that the Chipolopolo bonds will be fully subscribed by institutional investors and ordinary citizens.