Local Contractors Receivables Bond: FG demonstrates credibility by fulfilling obligations to bond holders

The Federal Government of Nigeria has commenced servicing its obligations to the subscribers of the Local Contractors Receivables Management Limited Bond (LCR).

Greenwich Trust Limited, the sole issuing house and financial adviser on the transaction, said the servicing of the coupon on the transaction is a key demonstration of the Federal Government’s commitment to the transaction.

LCR is the special purpose vehicle created by the Federal Government of Nigeria to manage and repay the debts it owed local contractors. The first coupon, which became due under the first tranche of the Bond Issuance Programme, was disbursed to the respective bond holders.

“It is instructive to note that the Bond is the first Split-Coupon Bond to be issued in the Nigerian Capital Market,” the financial adviser said, and explained that the bond has a 3-year zero coupon and a 2-year fixed coupon component with an aggregate value of N233billion, issued in 3 tranches. The credit enhancements on the bond made it further appealing to key players in the Nigerian financial market.

Kenneth Ero, group executive in charge of capital issues at Greenwich Trust Limited, said “the Federal Government has underscored its commitment to honouring its obligations to contractors and investors alike by this move.”

The payments signaled the achievement of a key milestone in the management of Nigeria’s public sector debt. It is also a testimonial to the use of innovative Financial Instruments to improve the Nigerian economy. The LCR Bond Programme demonstrates Greenwich Trust’s capability and track record in providing innovative solutions to the financing needs of its clients. The company’s success in helping the Federal Government restructure its liabilities, whilst alleviating its debt burden as well as delivering the much needed liquidity and financial market depth attest to this.

Leading investment bank in Nigeria, Greenwich Trust Limited, believes that the funding structure it designed with the LCR Bond may be replicated to resolve existing government indebtedness to local contractors (currently estimated at N800bn).

A similar programme may be designed to finance infrastructure development. This should be one of the financing strategies required to address the various funding gaps that are expected to emerge in the near future, especially in view of the expected spike in infrastructure spend by the new administration.

Greenwich Trust Limited is a boutique investment banking firm based in Lagos.