Eurobond: Fed Govt, UBA, Zenith raise $2.5b

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• Fitch, S&P to rate more banks

• Rush for Eurobond continues

The Federal Government and two commercial lenders have raised $2.5 billion through Eurobond in the last four months. The Federal Government raised $1 billion in February and $500 million in March while Zenith Bank Plc and United Bank for Africa (UBA) Plc raised $500 million each within the periods.

The Federal Government’s $1 billion Eurobond offer, the fourth since 2011, was oversubscribed by nearly 800 per cent. The over-subscription surprised not a few pundits.The offer, which comes at $200,000 denominations and multiples of $1,000 denominations, will mature on February 15, 2032, with Citigroup Global Markets Limited and Standard Chartered Bank. Stanbic IBTC Capital is the Financial Adviser.

In March, the government announced that it has priced its offering of the $500 million aggregate principal amount of notes at a yield of 7.5 per cent. The terms and conditions of the $500 million notes,were identical to those of the Original Notes, $1 billion Eurobond, paying a coupon of 7.875 per cent per annum and maturing on February 16, 2032.

Zenith Bank’s and UBA’s Eurobond offers were both over-subscribed too. Zenith Bank raised $2.1 billion through Eurobond 2022 issue which was more than 300 per cent oversubscribed.The $500 million five-year senior unsecured benchmark bond (144A/REGS) was issued by the Tier-1 lender on the Irish Stock Exchange (ISE).

The bank’s Eurobond issue recorded success on three counts: pricing, subscription level and global appeal. Details of the issue show that the subscription level makes the issue highest by any non-sovereign and non-supranational company in sub-Saharan Africa. The issue, the lender said, is in addition to the existing $500 million which matures in April, 2019.

The bond was issued at par with both coupon rate and yield to maturity rate priced at 7.375 per cent, representing 50 basis points better than the sovereign of 7.875 per cent. The rating of both the sovereign and Zenith Bank is B+ with the bond issue also rated B/B+.

Zenith Bank Plc established a $1 billion Global Medium Term notes in 2014, with $500 million already raised in the first tranche. The first tranche notes were listed and admitted to trading on the Irish Stock Exchange in 2014. The net proceeds of the Second Tranche Notes would be utilized for its general banking business.

UBA raised $500 million from international investors through Eurobond. Investors in the bond, the Tier-1 lender said, came from different parts of the world, including the United Kingdom, Europe, Asia, the Middle East and the United States.

The dollar-denominated bond, which was first of such offer by the bank, was 240 per cent oversubscribed. The significant investor demand, analysts say, reflects the strong global investor appetite for the bank’s credit and support for the group’s pan-African financial services strategy.

UBA, which is a leading pan-African financial institution, offers banking services to more than 14 million customers, across over 1,000 business offices and customer touch points in 19 African countries.

The $500 million Eurobond by the lender is a five-year senior unsecured benchmark bond (144A/Reg S) listed on the Irish .

The bank said fund realised from the offering will further support the group’s strategic vision, as it continues to grow its franchise across the continent and client segments.

The bond, which is rated by both Fitch (B, stable outlook) and S&P (B, stable outlook), matures in June 2022 and was issued with a coupon rate of 7.75 per cent, priced at an effective yield of 7.875 per cent.

Between 2011 and 2013, the lenders have raised $3.9 billion from the Eurobond market as Tier-2 capital (additional capital). In 2014, over $1.9 billion was also raised, especially through Eurobond issuances.

Currencies Analyst at Ecobank Nigeria, OlakunleEzun, saidEurobond issuances come at attractive rates relative to the domestic market and presently have many viable on-lending outlets.

He   noted that for the first time in Nigeria’s economic history, the private sector has been enabled to access long-term funds from both the domestic and international capital markets.

According to Ezun, the 2017 budget shows that both government and private sectors will continue to borrow, adding that more lenders will go for Eurobond because it is cheaper.He said any interested lenders have to submit themselves to rating by two international rating agencies- Fitch Ratings and Standard &Poors (S&P). He said many banks will approach the International Capital Market to raise more funds in the coming months as majority of them are already being rated by the global rating agencies.

But analysts  admitted the danger of potential pressure that may arise upon the payment of coupon on Eurobonds raised by banks adding that the lenders will require the dollar bi-annually to fulfill obligations to Eurobond holders.

 

 

The post Eurobond: Fed Govt, UBA, Zenith raise $2.5b appeared first on The Nation Nigeria.

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