Citadel Capital, the leading private equity firm in the Middle East and Africa with $8.7 billion in investments under control, has completed a $70 million capital increase for Platform Company Africa Railways Ltd.
This brings to more than $319.3 million the total equity and debt raised by Citadel Capital and its platform companies since the beginning of the year.
Four development finance institutions and a leading regionally focused private equity fund participated in the capital increase, including IFC African, Latin American and Caribbean Fund, LP; Dutch development bank FMO $15 million; German development finance institution DEG $ 14 million; FISEA, a vehicle dedicated to investment in Sub-Saharan Africa owned by France’s Agence Française de Dévelopement and managed by its subsidiary PROPARCO $10.7 million and International Finance Corporation $10.1 million.
Following the capital increase, Africa Railways, the Firm’s platform for investments in the African rail transportation sector, has total paid-in capital of $110 million. Africa Railways will use the proceeds from the capital raising to fund Portfolio Company Rift Valley Railways (RVR), which has a 25-year concession to operate a century-old rail line with some 2,352 kilometers of track linking the Indian Ocean port of Mombasa in Kenya to the interiors of Kenya and Uganda, including the capital city of Kampala.
“Amid current global conditions, institutional LPs demand that private equity general partners have clear, convincing investment strategies, proven track records and outstanding prospects. Citadel Capital has all three, a fact that has won us repeat investment from some of the most discerning global institutional investors, including FMO, DEG, PROPARCO and IFC. We thank them for their trust, and look forward to our new partnership with ALAC,” said Citadel Capital Chairman and Founder Ahmed Heikal.
Earlier this year, Citadel Capital lined up $21 million in financing from DEG and the European Investment Bank for the Firm’s Egyptian river transportation platform and a combined $25.5 million in equity and debt from the IFC to complete construction of a paper mill being constructed by a portfolio company of Grandview Holdings, its mid-cap investment platform. DEG, FMO, PROPARCO and IFC joined the African Development Bank and the European Investment Bank last year as anchor LPs in the combined $140 million first close of the Firm’s MENA and Africa Joint Investment Funds.
The Firm announced in August that six international financial institutions and one local bank were providing $164 million in senior debt financing for an ambitious five-year capital expenditure program at RVR.
“The proceeds from this capital increase will fuel Africa Railways’ ability as lead shareholder to fund RVR as the latter executes a five-year, multi-point rehabilitation program that will see RVR make a quantum leap in operating standards,” said Citadel Capital Managing Director Karim Sadek. “Safety, reliability, a greater hauling capacity, and simultaneous improvements to passenger and cargo service are at the core of this program.”
“The Firm has a proven track record of structuring compelling investment opportunities in very promising sectors of the African economy. This track record clearly helped us close a very challenging transaction that is good for RVR and good for the people of East Africa,” Added Amr El-Barbary, Managing Director at Citadel Capital, said.
“We are extremely happy to contribute to the completion of this important railway project, not only through our lending program but also as a long-term equity investor alongside our partner Citadel Capital and the other existing shareholders. In addition, FMO will make available capacity development funds to train RVR staff in occupational health and safety management, environmental management and quality management. Through this training program, we support RVR in its ambition to be a sustainable company working in accordance with international best practices,” Yvonne Bakkum, FMO’s Director Private Equity, said.
“DEG is excited to contribute to upgrading a piece of transport infrastructure that is among the most important to East Africa’s further economic development. We are once more very impressed by Citadel Capital’s ability to execute large and very complex equity transactions in Africa,” said Joachim Schumacher, Head of DEG’s Equity and Mezzanine Department.
“Despite lukewarm historical experiences of African railway concessions, RVR is compelling evidence that the private sector can still find strong investment theses in this industry while being a major catalyst for the development of the continent. This, however, requires adequate financial, strategic and technical expertise, which Citadel Capital has already demonstrated. PROPARCO, through its Sub-Saharan Africa-dedicated vehicle FISEA, is proud to be part of a development-critical project that will result in multiple benefits for the region, through lower transportation costs, stimulation of commercial exchanges and increased revenues for the states of Uganda and Kenya,” PROPARCO’s Head of Private Equity, Marie-Hélène Loison, said.
“IFC is pleased to be following our recent loan to this vital transport network in East Africa by also participating in the project’s equity financing,” said Ravi Bugga, IFC Global Head of Transport. “We look forward to the successful implementation of the investment plan as we continue to encourage private-sector private investment in infrastructure that promotes regional integration and social and economic development.”
Africa Railways is the largest shareholder in Rift Valley Railways and has management rights; Citadel Capital and its partners own a stake in Africa Railways exceeding 51%, also including management rights.