Successful Eurobond issuance repositions ETI

By Emeka Ejere

The dream of Ecobank Transnational Incorporated (ETI), the parent company of Ecobank Group, to enhance its capacity to meet its general corporate obligations, including the refinancing of a portion of debt it owed banks, is beginning to come true.

Following its successful $500 million Eurobond issuance, the company was last week hosted by the London Stock Exchange to a market opening ceremony to celebrate the successful listing of the Eurobond on the London Stock Exchange (LSE) main market. 

The bond, which was oversubscribed with strong demand from international investors in the United Kingdom, United States, Europe, Middle East, Asia and Africa., follows on from Ecobank’s 2017 convertible bond issuance on the International Securities Market. 

The five-year senior unsecured notes, which mature in April 2024, were launched with a coupon interest rate of 9.50 per cent per annum payable semi-annually in arrears. 

Moving into what the bank has called the ‘execution’ phase of a five year strategic plan which commenced in 2016,the Eurobond Issue  with one of the highest coupons for recent emerging market Issues would reposition the bank’s balance sheet and possibly increase its return on equity (ROE) in FY 2019, analysts say.

But more importantly with this transaction, ETI will be the first financial institution in Africa to raise a Eurobond at a holding company level, a major milestone for private debt finance in Africa.

The debt would perhaps support the bank’s forward guidance of growth in its loan portfolio of between 8 and 10% in 2019, thereby lifting its profit after tax expectations from $328.6m in 2018 to $358.7m for FY2019 (subject to Q1 2019 Results yet to be released by the bank).

 “This tap issuance was launched as a RegS 5-year USD denominated senior unsecured bond offering. It was oversubscribed by over 4.6 times. The issue price is 104.915 per cent of the principal amount, reflecting a yield of 8.25 per cent, a solid improvement from the yield of 9.75 per cent for the initial issue,” ETI said in a statement.

According to the statement, the proceeds will be used for ETI’s general corporate purposes and will further strengthen its liquidity.

It said, “The transaction is in line with ETI’s strategic objectives and forms part of the proactive management of its balance sheet to diversify funding sources and extend the average debt maturity profile.

ETI said the bonds had been placed with a broad range of institutional debt investors across Europe and Africa, adding that Standard and Poor’s and Fitch had confirmed credit ratings of B and B-Stable respectively to the issue, in line with ETI’s corporate rating.

The Group Chief Executive Officer, ETI, Mr Ade Ayeyemi, said, “As investor appetite deepens for emerging market offerings, we are positioned to offer the value that global investors seek. Our ability to open Africa to the world makes us a compelling choice.

“We appreciate the trust vested in us in continuing to build a strong independent African institution – a force for economic development in all of our operating markets.”

The acting Group Chief Financial Officer, Mr Ayo Adepoju, said, “The success of this tap, which was more than four times oversubscribed, confirms ETI as an attractive investment for fixed income investors.

“We are pleased with the performance of the initial issue on the secondary markets and the increasingly competitive terms we have been able to achieve with this tap, as evidenced by a 150-basis point reduction in yield.”

According to data compiled by Bloomberg, the yields will be about the juiciest since Ecuador sold $1bn of 10-year sovereign debt at 10.75 per cent in January.

It said the yields on the securities had dropped to 9 per cent as sentiment towards emerging markets improved and the government secured a $4.2bn loan package from the International Monetary Fund.

Ecobank, which reported a 44 per cent increase in net income to $328m in 2018 and a $1.8bn operating income, raised $200m in loans last year, which are due for repayment in November.

Many lenders in the country are looking to raise funding to finance their operations or increase capital reserves after a 2016 recession triggered a surge in non-performing loans and stricter accounting rules increased impairments.

 Incorporated in Lomé, Togo in 1988, ETI is the parent company of the leading independent pan-African banking group, Ecobank, which currently has a presence in 36 African countries.

The Group employs 16,386 people in 40 different countries in over 888 branches and offices.

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