Banks to become regular Eurobond market players soon

There are indications that the daily blackouts being experienced in the country will push deposit money banks to become regular players in the Eurobond market in coming years.

Banks are tapping Eurobond markets to be in a position to provide financing for projects including power, with Sterling Bank Plc seeking to raise dollars after Zenith Bank Plc, the nation’s second-biggest lender, sold $500 million of five-year notes on April 10. The yield on the security was 6.29 percent yesterday, compared with 5.07 percent in JPMorgan Chase & Co.’s Corporate EMBI Diversified Financial Sector Blended Yield index.

“They will need to refinance existing issues before they mature, but also to raise more funding for the financing of power, oil and gas and infrastructure projects”, Samir Gadio, an emerging-market strategist at Standard Bank Group, London told Bloomberg.

President Goodluck Jonathan’s administration, which sold 15 state-owned power generation and distribution companies last year, is spending $3.5 billion to boost transmission capacity this year in the country by 50 percent from 4,000 megawatts, less than a 10th of South Africa’s full capacity. Funds will come from the sales and borrowing as he seeks to alleviate daily blackouts in the country of 170 million people, the continent’s biggest economy.

The disposal of power as including sets last year attracted about $2.4 billion, with most of the financing arranged by local banks, Wale Shonibare, the managing director of investment banking at Lagos-based UBA Capital Plc, said in a Bloomberg TV Africa interview broadcast April 25.

Demand for Zenith’s bonds was more than double the amount on sale, the Lagos-based banker said in an e-mailed statement on April 17, without saying what the money will be used for. The issuance, arranged by Goldman Sachs Group Inc. and Citigroup Inc., is part of a $1 billion global medium-term note program. Zenith declined to comment beyond the statement.
Sterling Bank plans to sell a Eurobond in 2015 and will also start talks with investors to raise $200 million this year, Chief Financial Officer Abubakar Suleiman said by phone from Lagos on April 24.

“The amount for the Eurobond has not been determined,” he said. “It is intended to help the bank finance growth.”
Guaranty Trust Plc, which raised $400 million in November for oil and gas investments out of a $1 billion bond programme, has enough short-term dollar funding, according to Chief Executive Officer Segun Agbaje.

“If we see a long term funding need we’ll have to raise more funds,” he said in an April 9 interview.

Yields on Guaranty’s Eurobonds due November 2018 have dropped 16 basis points to 6.13 percent since they were sold. Fidelity Bank Plc’s $300 million of four-year Eurobonds have climbed 122 basis points to 8.36 percent since being issued last May.

HOPE MOSES-ASHIKE with wire report