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Debt Securities

ATTENTION: DV Balanced Fund to become a Money Market Fund

Vetiva Asset Management Company has requuested unitholders of DV Balanced Fund to attend a meeting in Lagos on May 28th by 11:00 am.

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Money market fund investments

As the love for high yield and low-risk investments continues to drive Nigerian investors into money market mutual funds and other money market financial products, some asset managers are thinking of converting some of the funds under their management to money market funds. After all, you got to sell what the buyer wants to buy!

One asset management company that has taken that thinking and consideration to a higher level is Vetiva Asset Management Company. In a notice of extraordinary meeting issued to the unitholders of DV Balanced Fund, the asset manager requested the unit holders to attend a meeting by 11:00 am on May 28th, 2019 at 266b Kofo Abayomi Street, Victoria Island, Lagos. Among the issues up for discussion at the meeting is the approval by the unitholders for the conversion of DV Balanced Fund from a Balanced Fund to a Money Market Fund.

The scheme of arrangement relating to the conversion, as contained in available information, includes the fact that the conversion will be consummated at the net asset value (NAV) of the fund as at the date of conversion, which is yet to be determined or fixed. The information also stated that the conversion ratio will be the net asset of the fund, rounded to 2 decimal places while fractional units will be rounded up to the nearest whole number.

When the conversion is completed, the fund’s name will be changed from DV Balanced fund to Vetiva Money Market Fund. Consequent upon the conversion, the trust deed of the DV Balanced fund will be modified to reflect the new objectives and investment policy and strategy of the resulting Vetiva Money Market Fund. The objective of the new fund, Vetiva Money Market Fund, will be “to preserve investors’ capital whilst providing liquidity and maximizing current income, in line with prevailing Nigerian Money Market yields, by investing in a diversified portfolio of money market instruments” while its investment policy will be to seek significant exposure to a diversified pool of money market securities while adhering to an asset allocation that is geared to achieving the investment objectives of the fund.

The Nigerian mutual fund industry is fast becoming predominantly a money market fund-based industry with money market funds accounting for 72.5% of the total asset value of Nigerian mutual funds, as of May 3, 2019. Out of the total net asset value of N772.8 billion, N560.4 billion reside in money market funds.

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About the Balanced Fund: The DV Balanced Fund is an open-ended unit trust scheme that seeks to invest in a range of securities, including quoted equities and fixed income securities. The Fund seeks to achieve capital appreciation over time while mitigating volatility associated with investing in the Nigerian equities market by holding an appropriate allocation of the Fund’s assets in fixed income instruments. The fund came alive on April 14th, 2014 with an offer of 20m units of N100 each. As of May 16th, the fund was priced as N104.242 per unit, representing an inception-to-date price appreciation of 4.2%. This is not a very impressive return.

The fund is one of those with good dividend history in the Nigerian mutual fund industry. In December 2016, it paid a 10kobo dividend, in June 2017, it paid N2.00 and again in December 2017, the fund paid a 50 kobo dividend. The climax of that was the N23 dividend per unit pain in April 2018. For those that invested in the fund from inception, they should have received a total dividend of N25.6, representing a return of capital of 26% approximately. The fund charges a 1.5% annual management fee as well as 1% penalty on withdrawals made within the first 90 days of investment. It does not look like the conversion will affect those fees.

About Vetiva Asset Management: Vetiva Asset Management is one of the fund managers that manage multiple funds in Nigeria. In total, it manages six mutual funds (including exchanges traded funds) with a total asset value of N3.4 billion as at May 3rd, 2019 of which the DV Balanced Fund had the lowest net asset value of N112.7 million. The fund manager is reputed for its transparency as the prospectus of their funds are readily available on the web site as well as up to date fact sheets and daily prices.

Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.

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Debt Securities

UPDC moves to redeem N4.355 billion bonds

UPDC is set to redeem its N4,355 billion Series 1 Bonds on the 26th of April, 2021.

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UACN Property Development Company Plc (UPDC) is set to redeem its N4,355 billion Series 1 Bonds on the 26th of April, 2021.

This information was contained in a notice tagged “Notice to the Bondholders of UACN Property Development Plc”, issued by the Company Secretary, Folake Kalaro.

According to the information contained in the notice, UPDC, under Condition 3.2 of the Terms and Conditions of the Bonds, will redeem the N4,355,000,000 Series 1 Bonds on the 26th of April, 2021 from the bondholders, together with the accrued Coupon (the annual interest rate paid on the bond) up to, but excluding the Redemption Date.

The company revealed that the Coupon on the Bonds will cease to accrue on and after the Redemption Date.

What you should know

  • On the Bond’s Redemption Date, it is important to note that the Registrar of the Bonds, Africa Prudential Plc, shall pay to each Bondholder’s designated account, the amount payable to him/her in respect of the Redemption.
  • The Redemption payment to the Bondholders shall be equal to 100% of the principal amount together with all accrued and unpaid Coupon. Following the Redemption, the listing of the Bonds on the FMDQ Securities Exchange Limited will be canceled.
  • It is essential to understand that the N4.355 billion Series 1 Senior Guaranteed Fixed Rate Bond Due 2023 under UPDC’s N20 billion Bond Issuance Programme, was listed in 2018 following the approval of the SEC.
  • The move to issue the N4.355 billion bonds was made following an unsuccessful attempt to raise N5.16 billion via a rights issue, which recorded subscription for 879.65 million ordinary shares valued at N2.64 billion.

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Debt Securities

Ecobank Nigeria secures N50 billion 10-Year subordinated loan

Ecobank Nigeria has secured a N50 billion, 10-year bilateral subordinated loan.

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Ecobank Nigeria

Ecobank Nigeria, a subsidiary of Ecobank Transnational Incorporated (‘’ETI’’) has announced that it has secured a N50 billion, 10-year bilateral subordinated loan.

This is according to a disclosure signed by the Group Head, Adenike Laoye and sent to the Nigerian Stock Exchange, as seen by Nairametrics.

The bilateral funding will enable the bank to maintain stable liquidity and improve its balance sheet, especially the capital adequacy ratio by an estimated circa 300 basis points.

What they are saying

The disclosure from the bank read thus:

“Ecobank Transnational Incorporated (“ETI”), the parent of the Ecobank Group, announces that one of its significant subsidiaries, Ecobank Nigeria, secured N50 billion, 10-Year bilateral subordinated loan.

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“The bilateral funding provides stable medium-term liquidity to the balance sheet of Ecobank Nigeria and positively improved its balance sheet ratios, especially the capital adequacy ratio by circa 300 basis points. The transaction proceeds would be deployed to support Micro, Small and Medium Scale Enterprises (“MSMEs”) and Small Corporates.”

What you should know

Ecobank Transnational Inc. had earlier recorded 11% rise in its interest income to N139.6 billion for Q3 2020, as captured by Nairametrics.

  • Subordinated loans have lower priority than other debt instruments in case of liquidation. They are only repayable after other debts have been paid.
  • This debt can either be secured or unsecured and it typically has a lower credit rating and higher yield than other senior debt.

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Companies

Flour Mills moves to diversify funding sources with N29.8 billion bond listing

Flour Mills Nigeria Plc lists N29.8 billion bonds to diversify funding sources from the Nigerian capital market.

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Flour Mills makes one of the largest contributions to COVID-19 relief fund

Flour Mills Nigeria Plc’s fresh N29.8 bond listing will help the nation’s leading food business company to explore diversified funding sources from the Nigerian capital market, with the hope of enhancing growth and the development of the company.

This statement was made by the Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the listing of the Tranche A and Tranche B bonds valued at N29.8 billion on the Nigerian Stock Exchange (NSE).

The food and the agro-allied company which has remained Nigeria’s largest and oldest integrated agro-allied business with a broad profile and robust Pan-Africa distribution issued these bonds under its N70 billion Bond Issuance Programme.

Olusanya said that the company would continue to explore funding opportunities inherent in the capital market to ensure business growth and continuity.

While speaking about the Credit Rating of the Programme, he disclosed that FMN’s credit rating, as well as the operational financing of the Group, have improved considerably.

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According to him, the bonds floated by Flour Mill will help to strengthen the company’s capital base and provide the needed working capital required by the Company. He added that Flour Mills Group will continue to deleverage and replace short term financing with longer-tenured and lower price funding to optimize capital structure and reduce financing cost.

He noted that Flour Mills will continue to explore opportunities to raise fundings via the capital market as this enables the company to diversify its funding sources and continue to play a role in the capital market as a significant player in it.

What they are saying

The Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the virtual event, said;

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  • “We are delighted with the response from the market, we are happy to be listed.
  • “We are introducing an N29.9 billion listing under an N70 billion bond issuance cover; we will continue to raise funding to diversify our funding sources.
  • “The company remains passionate about feeding the nation to improve the quality of living for Nigerians through increased production and investments in backward integration.”

What you should know

  • With the successful issuance of the new N29.8bn Tranche A and Bonds, FMN has utilized its bond issuance program registered in 2018.
  • It is important to note that the Senior Unsecured bond listing includes an N4.89bn under Series 4 Tranche A of the bond issuance programme, at a 5.5% rate for 5 years, due by 2025, and a 25bn under Series 4 Tranche B of the same program at a 6.25% rate for a tenure of 7 years, due by 2027.
  • The bond proceeds will be used to refinance existing debt obligations. It will also help the company take collaborative actions to diversify the company’s financing options beyond expensive short term debt.

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