TCX and FMO issue first ever offshore Congolese franc note

Yesterday, the Dutch entrepreneurial development bank (FMO) issued on the Luxembourg Stock Exchange the first ever offshore Congolese franc note, with a countervalue of $20m (or about FCFA 40bn) and 14-month tenor.

The issuance of the AAA-rated note was supported by TCX, a fund specialised in shielding international lenders and their local borrowers in emerging and frontier markets from exchange rate volatility.

By providing FMO with a Congolese franc currency hedging solution at the time of bond issuance, TCX took the currency risk ensured that its Congolese franc bond was converted into US dollars.

The bond is a synthetic one, meaning it was issued as an asset in Congolese franc, but the reconciliation of all cash flows is done in US dollars. The investors who acquired this asset bought a bond with the triple-A credit rating of FMO, but with a coupon reflecting the risk exposure of the Congolese market.

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