Ecobank Transnational Incorporated (ETI) will raise $600 million through senior secured debts and tier-2 debts over the next year.
This was one of the resolutions from the group’s Annual General Meeting which took place in Lome, Togo on June 6, 2024.
In the notice containing the AGM resolutions, it was contained,
“The General Meeting hereby authorizes the board of directors to raise within a period of one year from the date of this meeting up to Six Hundred Million United States Dollars (US$600,000,000) in senior-ranked debt, Tier 2-qualifying subordinated debt or a combination of these forms of instruments as the board of directors may deem appropriate.”
Senior-ranked debt and tier-2 qualifying subordinated debt
Senior ranked debts are a type of debt that has priority over other debts in terms of claims on the assets of the issuer. This means that senior-ranked debt holders are paid before other creditors, such as subordinated debt holders.
- Tier 2-qualifying subordinated debt is a type of subordinated debt that qualifies as Tier 2 capital under banking regulations.
- It ranks below senior debt but above equity in the event of liquidation, meaning it is riskier than senior-ranked debt but less risky than equity.
- An example of tier-2 debts is the $350 million Tier-2 Sustainability Notes listed by ETI on the London Stock Exchange in 2021.
Ecobank’s bond history
Recall that in April 2024, Ecobank Transnational successfully repaid a $500 million Eurobond which matured on April 18, 2024. The Eurobond, issued in April 2019, was listed on the London Stock Exchange with a coupon rate of 9.5%.
This was the group’s inaugural Eurobond, however, its subsidiary, Ecobank Nigeria issued a dollar-denominated bond in 2014.
In 2014, Ecobank Nigeria issued its first ever dollar-denominated bond, a $200 million bond which was listed on the Irish Stock Exchange. The bank received advisory services from the African Export-Import Bank (Afrexim).
And there was an oversubscription on the bond offering.
Then in June 2021, Ecobank Transnational issued $350 million Tier 2 Sustainability Notes, which were listed on the London Stock Exchange. According to the group, these notes were oversubscribed by over 3.6 times, reaching a subscription of $1.3 billion.
The notes which mature in June 2031, will pay an annual interest rate of 8.750% between June 2021 and June 2026. However, from June 2026, the interest rate will change to a new rate called “Reset Interest Rate”.
It was noted in the group’s “Sustainable Finance Framework” that proceeds from the sustainable financing instruments such as the sustainability notes would be used to finance and/or refinance, in whole or in part, green and/or social projects.
What you should know
This capital-raising initiative is unrelated to the recapitalization efforts mandated by the CBN. Ecobank Nigeria currently stands as the sole bank in the country to surpass its new minimum capital requirement, boasting a paid-up capital of N353.5 billion—significantly exceeding the N200 billion minimum capital mandated for a national banking license.
The group also posted a net income of $498.4 million in FY 2023. However, all of the group’s profits were transferred to its retained earnings, without payment of dividends.
Speaking on the non-payment of dividends by the group in 2023, the Group’s Chairman, Alain Nkoutchou noted,
“Rest assured, this cautious stance is not a sign of retreat, but a strategic move aimed at ensuring the long-term stability and resilience of our Group and safeguarding the interests of our shareholders.”
On June 7, Ecobank Transnational closed with a share price of N23.85, marking an 8.41% gain from the previous day. The stock has also recorded a year-to-date gain of 14.1%.
