Zenith Bank Plc has joined the league of Eurobond issuers among the nation’s deposit money banks, as well as increased the continent’s level of debt obligations on the European market, at the weekend.
The bank sold $500 million in five-year senior unsecured Eurobonds, with a coupon of 6.25 per cent.
The move may have been strategic for the financing of its power sector, oil and gas and other project loans, even as the financial institution appeared to have taken advantage of a favourable window of opportunity in global capital markets characterised by a further compression in emerging market.
According to market analyst at the Standard Bank, Samir Gadio, the stronger Naira at N160.8 per dollar in recent days may have also eased foreign investor concerns about the bank’s exposure to foreign exchange risk.
The order book for the bank’s issue amounted to $1.3 billion, which indicated oversubscription, with United States of America, United Kingdom and European investors accounting for 44 per cent, 35 per cent and nine per cent of the allocation.
Also, in terms of investor type, fund managers dominated by 74 per cent, followed by banks and private banks, 15 per cent, hedge funds, nine per cent and insurance and pension funds, two per cent.
However, Nigerian entities only represented six per cent of the allocation, which is rather low compared to previous Nigerian corporate Eurobond issuances.
“Because Nigerian financial institutions need to match dollar assets and liabilities and since a dollar Eurobond is a natural hedge against any future Naira weakness, we suspect onshore accounts will probably get involved at a later stage in the secondary market. The domestic bid will gradually squeeze supply, as has been the case with other Nigerian corporate Eurobonds.
“The appointment of the outgoing Chief Executive Officer of Zenith Bank, Godwin Emefiele, as next CBN Governor, may have also boosted the momentum for the bond issue. While the CBN leadership factor possibly shaped and influenced the market perception of the bank’s Eurobond, there is however no scope to suggest any implicit or explicit institutional support for it,” Gadio said.