Trading commences on GT Bank's N13b bond at the Exchange
Category: Capital Market
Guaranty Trust Bank Plc made history yesterday, when 13.5 per cent of its fixed rate senior unsecured non-convertible bond, valued at N13.165 billion, issued through a Book Building process, was listed on the Nigerian Stock Exchange (NSE). This is the first bond to be listed through this process.
Book Building is a capital raising process that aids price and demand discovery. It is a process used for marketing a public offer of securities. The issue is to enable the GT Bank access long-term capital to finance medium-to-long-term projects, particularly developmental and infrastructural projects in the key sectors of the economy.
The NSE's Assistant General Manager and Head of Corporate Communications Department, Sola Oni, explained that the bond, which is the first tranche of the bank's N200 billion Debt Issuance Programme, has a five-year tenor with 13.5 per cent coupon and semi yearly interest payment fixed for June 18 and December 18.
Commenting on the uniqueness of the bond, an Executive Director of WTSC Financial Services Limited, Joint Issuing House to the offer, Mr. Afolabi Afolayan, said the bond was assigned an Aa- rating by Agusto and Company Limited. The lead Issuing House was GTB Asset Management Limited, while FBN Capital Limited and WSTC Financial Services Limited were the Joint Issuing Houses.
Afolayan explained that GT Bank's decision to give back to investors withholding tax charged on the bond would increase the yield to 15 per cent from 13.5 per cent earlier promised investors. He also underscored the potential liquidity of the bond as one of its unique characteristics, saying this would enhance demand for the instrument on the NSE.
He commended the Exchange for facilitating the Book Building initiative, through its huge investment in information and communication technology that has greatly enhanced market efficiency.Officials of the NSE said the Exchange's Automated Trading System (ATS) and Central Securities Clearing System (CSCS) Limited, stand to provide seamless trading, settlement and delivery on the bond like other listed financial instruments.
The Exchange has also reduced the transactions charges in bond as part of the incentives to make investment in bonds very attractive. Many companies are expected to take advantage of Book Building process to raise fund through the capital market.
The process does not only reveal the demand and price investors are willing to pay, but it is also highly cost-effective.