By Linda Main

Rand Merchant Bank (RMB) has successfully closed a new US$20million letter of credit and performance bond facility for BAM International, a wholly-owned subsidiary of the Royal BAM Group, the largest construction company in the Netherlands. The facility is required to facilitate BAM’s construction projects in its key jurisdictions across Africa namely Ghana, Kenya and Tanzania.

The $20-million facility is required by BAM for demand guarantees, standby letters of credit, surety bonds and counter indemnities for its projects in these countries.  The lenders to the facility are FirstRand Bank as well as the individual subsidiaries of FirstRand Bank Limited in Ghana and Tanzania allowing for flexibility in which each entity can issue the instruments as required. FirstRand, through RMB has implemented a Master Risk Participation Agreement (MRPA) with each of its subsidiaries to reduce complexity by facilitating issuance in-country and thereby reducing the time needed to transport the original documentation. The MRPA allows for the subsidiaries to issue instruments in excess of their regulatory single obligor limit which provides a competitive edge over other domestic banks. The guarantee facility is available for a period of 12 months .

BAM, founded in 1869 has a strong presence in Europe and has also invested in projects in African countries where FirstRand is also present. For example, BAM is involved with the rehabilitation and extension of the Tanzania’s Kilimanjaro Airport and the construction of Terminal 3 at Julius Nyerere International Airport in Dar es Salaam.

RMB was awarded a GTR Best Deals award from the Global Trade Review (GTR) 2016 for the BAM transaction, an award the bank was also awarded in 2014. GTR Best Deals awards reward trade, export, commodity and project finance transactions that represent the finest of this industry in terms of innovation, social purpose, clever risk mitigation and, most importantly, continued support to trade.

Linda Main is a transactor at Rand Merchant Bank, Trade and Working Capital