Diamond Bank Plc has issued its debut $200 million five-year Eurobond.
The bank plans to also tap the equities market to raise between $200 million to $250 million.
Diamond Bank is seeking to raise $500 million additional capital in its quest to raise its tier-2 capital by $750 million.
The bank’s Chief Finance Officer, Mr. Abdulrahman Yinusa told Reuters yesterday that the Eurobond is quoted on the Irish Stock Exchange. The yield was 8.75 per cent.
However, THISDAY learnt that the yield on the fixed income instrument, at inception was nine per cent (issue price of 99.0).
The notes are expected to be rated B by S&P and Fitch.
Diamond Bank had planned to place a Eurobond (albeit a tier-II note) in June last year, and even it undertook an investor roadshow, but the issuance was postponed due to the adverse market environment at the time.
But Emerging Market Strategist at Standard Bank, Mr. Samir Gadio who explained that market conditions are now supportive, added that the bank clearly took advantage of the multi-week window of opportunity in global capital markets characterised by further compression in emerging market Eurobond spread.
“Furthermore, the more resilient naira in recent weeks (albeit less so in mid-May) and relative stabilisation in foreign reserves, coupled with the Central Bank of Nigeria’s continued commitment to exchange rate stability, should have in principle also eased foreign investor concerns about the bank’s exposure to forex risk.
“Diamond Bank initially announced that it would attempt to raise $300 million -$350 million from the market, but the final size of the deal ($200 million) suggests that investor demand for the 19s was muted and/or a number of offshore accounts required a more significant yield premium,” he added.
He also noted the frequency and cumulative scale of Eurobond supply from Nigerian banks, especially following the recent Zenith Bank $500 million issue as well as Wednesday’s announcement of plans to raise $750 million in form of a medium-term note programme.
“In this context, the demand-supply mismatch for Nigerian corporate Eurobonds may incrementally become less pronounced, unlike a few years ago, with the potential to result in a more cautious asset selection process among investors and even gradually force the less robust names to pay a higher premium,” he added.
This article first appeared on Thisday
The race is on as Nigerian banks move to strengthen their tier 2 capital base. Tier 2 capital is basically quasi capital that do not rank as Equity but are not deposits. Banks use this to depen their balance sheet and use the money to finance loans. This is particularly important considering the recent squeeze on public sector CRR. More banks will be raising capital this year.