Fidelity Bank last week issued a 5-y $300m Eurobond with a coupon of 6.875%.
The issue price was 99.48 and the spread 635 basis points (bps) over United States Treasuries UST (implying a 7% yield).
Analysts say, fair value was probably initially between 6.5% and 6.75%, slightly below the actual yield at issuance and expect the bond to trade at a premium to Access Bank 2017s bond (at 475 bps over UST) and GTB 2016s (at 421 bps over UST) consistent with the fundamentals of these respective institutions.
“We suspect Fidelity Bank 2018s should deliver some price upside for a number of reasons,” said Samir Gadio, an emerging market strategist at Standard Bank in London.
“First, the feedback from global fixed income investors is that the deal was not widely marketed which explains why the order book may have been below potential. As such, a number of offshore accounts have yet to get familiar with the name and possibly involved in the secondary market. In this context, a slight drop in the bond’s price post-issuance actually represents a buying opportunity.”
Gadio adds that the typical demand-supply mismatch for sub Saharan Africa SSA Eurobonds will most likely eventually result in further spread compression while the domestic bid from Nigerian financial institutions will also squeeze supply as had been the case with the GTB and Access Bank USD bonds in the past.
The favourable demand bias often reflects the Nigerian banks’ need to match their USD assets and liabilities.
The low global rates and ample liquidity would also be a plus for the issue.
Fidelity Bank is a mid-size (Tier II) bank focused on the middle market of the Nigerian economy.
Fidelity Bank said in April that its full-year pre-tax profit jumped to N21.62 billion ($136.92 million), from N161 million in the previous year.
Gross earnings rose to N78.99 billion, from N49.53 billion in 2011, the bank said.
The stock is up 110 percent in the past year, compared to a 58 percent rise in the wider all share index.
PATRICK ATUANYA
