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MFI Investments Ltd is a newly established investment company in Tanzania. The Company is currently largely financed by local bank loans, with its interest rate
MFI Investments Ltd is a newly established investment company in Tanzania. The Company is currently largely financed by local bank loans, with its interest rate on loans being tied to six months LIBOR rates, which makes the Companys cost of obtaining funds sensitive to interest rate movements. The company has also a credit line with some local commercial banks, just in case it suddenly needs additional funds for a temporary period. The Company, on the other hand, holds a large portfolio of both foreign and domestic financial securities worth about TZS billion as at todate, which it aims to expand into a mega East African investment base by the year In order to finance its investment base expansion, the Company plans to immediately list at both Dar es Salaam Stock Exchange DSE and Nairobi Securities Exchange NSE as well as borrow substantial longterm loans in both TZS and US dollars. Borrowing is expected to be executed through a combination of both bank loans from local commercial banks and issuing of corporatebonds. Required:i Elaborate how might financial intermediaries facilitate the Companys expansion. ii Elaborate how venture capital VC might facilitate the Companys initial public offering IPOiii. Why might the Company have limited access to additional debt financing during its expansion ie growth phase? iv Elaborate how might investment banks facilitate the Companys IPOv. Illustrate how the Company might use both primary and secondary markets to facilitate Its expansion. vi Explain the potential financial risks facing the Company and the appropriate strategies it may apply to address them.
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