Nigerian bank’s $0.5 bn high yield eurobond

Nigeria’s Guaranty Trust Bank (www.gtbank.com) is coming to the market with a $500 million Eurobond, which could potentially roll out into a $2 billion offering, according to sources in the last few days. The bank is listed on the Nigerian and London Stock Exchanges.
According to a story on Reuters on 12 May the bank is about to launch the 5-year bond and the price could be set at 7.75%. The lead managers are to be JPMorgan and Morgan Stanley.
In January the Federal Government of Nigeria’s issued a $500 mn debut 10-year Eurobond at a yield of 7%, according to a previous Reuters story. The offer was apparently 2.5 times oversubscribed but the bond had been trading broadly flat at 6.9% ever since. It was not much shaken by the April elections, as it seems the market is betting on stability and growth going forwards and the price climbed to give a yield of 6.1% by last week.
Reuters reports that GT issued a $350 million bond in 2007 which matures in Jan 2012. The bond has a coupon of 8.5% and is yielding 4.8%.
A research note from Standard Bank also boosts the bonds. “We consider the new Notes due 2016 to be one of the best emerging market bank securities in our universe. GTB is one of the largest banks in Nigeria. It is well-capitalized and highly profitable operating in a market that is hugely underpenetrated. Liquidity is strong. Management is experienced and sophisticated and very importantly to us, experienced in successfully negotiating a banking crisis. During the 2009 Banking crisis in Nigeria, GTB was resilient and quite successfully underwent increased regulatory scrutiny.” The bank says the bonds are at a “significant spread” to the Government bond and compared to other emerging market financial institutions trade, they find the bonds “attractive” and add “with time and increased local participation, we would not be surprised to see the Notes trading inside of 7%.”
The bank was founded in 1990 and at the end of the last financial year was Nigeria’s fourth largest by assets, with market capitalization of $3 bn.
Broker Exotix has also praised its “diversified loan portfolio, conservative management and superior risk management” and says it has superior asset quality.

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