What is the Midina Infrastructure Fund?
The investment objectives of the MIDINA Fund are to:
- Support social and economic upliftment in Namibia
- Pool investment funds and invest funds in a manner that makes a tangible and visible contribution to the development of the infrastructure capacity in Namibia
- Generate acceptable returns for investors (i.e. returns that are commensurate with the underlying risk)
- Be fully invested within the investment guidelines and constraints
In order to qualify for funding via the MIDINA Fund, projects should:
- Be infrastructural in nature and economically viable
- Be consistent with internationally recognised human rights
- Provide employment opportunities to the community
- Be compliant with Namibian environmental laws
- Provide positive economic spin-offs to the community and the country at large
- Be economically, socially and environmentally sustainable in the long-term
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- Roads, including toll roads
- Railways and ancillary services, such as railway stations and railway communications
- Bulk power supply and power distribution projects
- Telecommunications infrastructure
- Bulk water supply, water and waste-water treatment or reticulation projects
- Property investments in under-developed areas
- Low-cost housing and servicing of erven
- Community projects aimed at improving the standard of living for all with an emphasis on the previously disadvantaged
- Privatisation or commercialisation of Government services
- Submit a letter to the fund setting out the nature of the project, the capital required, the proposed repayment terms and the identity of the borrowing entity.
- An initial broad assessment is conducted to determine whether the basic requirements for funding have been met.
- Current capital structure: The availability, pricing and other aspects of capital depend on the nature of the prospective borrower’s existing debt - for instance, the debt’s amount and maturity, the nature of any covenants, and the type of debt (e.g. senior or subordinated/mezzanine, revolving or term, secured or unsecured). In trying to grasp a prospective borrower’s total debt capacity, potential lenders will also assess the company’s ratio of total debt to earnings before interest, taxes, depreciation and amortisation (EBITDA), as well as total debt to equity.
- Cash flow: In evaluating current and future cash flow, lenders will generally look at three years of past financial performance and five years of projected performance. That includes income statement and balance sheet trends, as well as a financial ratio analysis. In scrutinising projected financial performance, lenders will look at the reasonableness of assumptions and overall believability. They will also analyse debt and lease amortisation/payments, interest coverage, capital expenditures, and working capital needs.
- Collateral: Lenders consider current and fixed asset collateral, such as receivables and inventory, as well as the appraised asset values of the relevant property, plant and equipment.
- Conditions: These comprise the company’s industry environment (including cyclicity and seasonality), competition and barriers to entry, pricing power, gross profit margins and operating profit margins, product and technology risk, product life cycle, the company’s position in its industry, and comparable companies and transactions.
- Character of borrower: This reflects the nature of the business itself, management’s strength, the company’s customer base (existing and potential, turnover, backlog), and the company’s suppliers (concentration and alternatives). In assessing a prospective borrower’s character, lenders may consider a variety of other factors as well, including contingent liabilities, legal and environmental issues, “intangible” assets such as goodwill and trademarks, and labour relations.
- Once a thorough assessment has been conducted and the applicant has provided all additional information requested, the project will be referred to the MIDINA Fund’s Investment Committee for approval.
- Funds can only be disbursed once the aforementioned approval has been obtained and a loan agreement has been signed between the MIDINA Fund and the borrower.
Interest is charged at market-related rates (generally variable and linked to prime, although fixed rates are also negotiable.) The actual rates are determined individually for each project (i.e. taking into account factors such as the nature of the project, the financial position of the borrower, the quality of the security offered and the term of the loan).
A grace period is offered specifically in the case of construction projects, where repayments are generally not required for the duration of the construction phase.
The tenure of the loans is subject to negotiation but should generally not exceed 8 to 10 years, and the installments are payable at such intervals as are deemed appropriate in respect of each specific project.
In order to ensure adequate diversification within the portfolio, a minimum of N$5 million and a maximum of N$50 million may be allocated per project or borrower (note that this upper limit may increase in line with an increase in the overall size of the MIDINA Fund).
The fund is not in a position to provide unsecured loans since there is an obligation to take on senior debt and mitigate the investor’s risk. The nature of the security that would be acceptable would vary significantly, depending on the nature of the borrower, and could include amongst others, mortgage bonds and guarantees as well as cession of income derived from the project.
Given the diverse nature of the projects that are considered for funding, standardised application forms are not used and applicants are therefore requested to proceed as follows:
Broad conditions required for project assessment include: