Nigerian mobility startup Metro African Xpress (MAX) has successfully completed the issuance of a 1-year 400 million yen ($ 1 million) fixed rate Series 1 bond. The bond is the first part of its new multi-currency private corporate bond program of 10 billion yen / 22 million dollars (dubbed the “PCB program”).
The startup made the announcement on September 28, 2020 and the transaction was arranged by DLM Advisory Limited, a Nigeria-based development investment bank regulated by the Securities and Exchange Commission (SEC).
To anyone unfamiliar with the capital market, this may seem like a rare decision for a startup and possibly a bit confusing. By issuing bonds, most established companies can raise funds from investors without having to give up their shares or repay the high interest rates on bank loans.
Guy-Bertrand Njoya, Chief Financial Officer (CFO) of MAX, explains that the startup has explored several other ways to raise funds in the past, including venture capital financing, angel investments, bank loans, among others. This new initiative marks its first foray into the Nigerian capital market.
“The most exciting thing for us about this revolutionary funding structure is being able to shut it down in the midst of the current social and economic uncertainty,…. with that, we don’t have to further dilute the business, ”he said.
According to data from Crunchbase, since its launch in 2015, MAX a raised up to $ 8.2 million in 4 major rounds of financing. The first in 2015 was a $ 100,000 convertible note, while the venture capital rounds took place in 2016, 2019, and 2020 at $ 1 million, $ 7.2 million, and $ 100,000 respectively.
According to Njoya, the bond issuance is part of a larger program and is structured in such a way that the startup can continue to raise funds by issuing more bonds at any other time it deems appropriate.
“Normally you can issue a term bond, and when it ends you start the whole process with the SEC and all the parties involved, but it’s structured so that we can continue to raise funds at different time periods, in different types of currencies, “he says.
Njoya reveals that the multi-currency clause has been placed with a view to future expansion to other countries.
“We are building pan-African solutions along the entire mobility sector value chain, and the structure of the new bonds will go a long way to help us achieve this. “
An eye for expanding vehicle financing
MAXIMUM launched as a logistics startup in the busy city of Lagos, but it has since turned to various transport and logistics service offerings and is currently focusing on a substantial presence across the value chain in the mobility sector.
The ban on commercial motorcycles and the tricycles in Lagos made things a bit fragile, but it has turned to deliveries and is currently present in six states in Nigeria.
In June 2019, the company announced its intention to introduce bicycles after closing a $ 7 million funding round led by Kenyan venture capital firm Novastar Ventures and Japanese multinationals Yamaha. In August 2020, he finally unveiled these bikes.
MAX says the initial $ 1 million float generated great interest from high-profile local and international fixed income investors, both local and foreign, and that the proceeds from the bond would be used to fund its bond program. growing vehicle financing through, 2-wheel, 3-wheel and other classes of vehicles.
Njoya insists that MAX’s vehicle finance program would allow people, especially those who are not eligible to receive financing from banks, to obtain various types of vehicles that they can use for business activities. .
This move could also be good news for Ekiti bikers who could benefit from MAX doubling on vehicle financing.
Recall that the company recently partner of the state of Ekiti government on “Metrogov”, a platform to digitize the state transport sector. Among several other advantages, he listed vehicle financing as one of the main advantages of the strategic approach.
Interestingly, since the bikes and tricycles have been securitized in the bond float, investors will get returns on the product once these vehicles go to market.