“Our vision was to develop a platform where a corporate could raise funding from the wider debt capital markets.”
When Addendum launched the Funding Solutions division our goal was clear, to change the way high quality corporates raise debt funding
Strong corporate relationships built up through a successful supply chain finance business enabled Addendum to recognise opportunities in the fixed income market. It was clear that corporates were looking for a simpler, faster and more cost-effective way to connect with the debt capital market participants. To solve this problem the Debt Solutions division set out to change the way high quality corporates in South Africa raise debt funding. Historically, banks dominated the short- and long-term funding to corporates but our vision was to create an online platform where corporates could raise funding from the wider debt capital markets. The institutional market, consisting of the life insurers, hedge funds and asset managers, control a significant funding pool but often corporate South Africa finds it near impossible to access these funds. We believed that corporates would benefit significantly from having a single Fintech platform where they could access the institutional market in a simple manner and thereby achieve a diversified funding base at competitive pricing.
Simplicity, transparency, and speed of execution underpinned our product development principles
To support the local industry the Addendum Debt Solutions Platform was developed in South Africa. The official launch of the Platform was in early 2018 following consultation with various market participants. In addition to developing the online Platform the team at Addendum developed a standardised debt agreement which underpins our offering. This ensured that legal negotiations were simplified, and costs minimised. With a standardised agreement and a user-friendly Platform, treasurers and finance executives were empowered to take funding into their own hands. Corporate issuers were now able to initiate, negotiate and sign bilateral debt agreements with debt capital markets participants. Using simplicity, transparency, and speed of execution as the foundation of the Platform, Addendum was able to break through successfully. The first debt instrument was issued in May 2018 by one of the listed retailers. After twelve months a handful of corporates had joined the Platform and tested our product by issuing short term debt successfully. It was only in Mid 2019 that we issued our first long term unlisted debt instrument. Finally we were able to show the market that the Platform could be used by corporates to successfully raise both short- and long-term debt at competitive pricing.
Strong growth in the funder base unlocked instant value for corporate issuers which accelerated the platform’s adoption curve
In May of 2019 we breached the R1bn mark in issuances and by the end of 2019 we had four corporate issuers that had raised funding on the Platform from nine different funders. We spent the better half of 2020 growing our user base and by the end of the year we had 18 corporate users and 29 funders on the Platform. With this strong growth in the funder base, we succeeded in offering corporates true diversification of funding sources and guaranteed good pricing tension during the debt raising process. We started 2022 with 33 funders hungry for new issuance which bears well for corporate issuance this year. But the highlight of the year so far was the issuance of our 100th debt instrument during February. Quite apt that the 100th instrument was issued by the same corporate that issued the first instrument – a testament of the value our Platform continues to deliver to corporate users in securing funding at competitive pricing.