Renaissance Capital Leads Landmark US$300m 7.125% 5-Year Eurobond Offering For Ecobank Nigeria

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Thursday, February 11, 2021 / 10:00PM / by Proshare Research from Ecobank Nigeria Bond Offer document and Additional Press Release by the Bank / Header Image Content: / Header Image Content: Talks Business


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With global capital markets huffing to a gingerly start in 2021 investments in equities and fixed income securities are off to a bright start, even in frontier economies such as Nigeria. Indeed, nudging aside COVID-19-induced economic disruptions, Renaissance Capital, has led the recent foray into the international debt market on behalf of Ecobank Nigeria, part of the Ecobank Transnational Incorporated (ETI) Holding group.

 

Key highlights of the transaction are presented below:

 

Highlights: Braving A New Global Debt Market

On the 10th of February 2021, Ecobank Nigeria successfully locked into the international debt market with a US$300m 5-year 7.125% Reg S / 144A senior unsecured bond issue. The lead runner of the Offers book was Renaissance Capital which also acted as the joint lead manager of Offer.

 

The US$300m issue moves the needle for international bond raise by frontier economy corporations such as Ecobank Nigeria. The  key features of the offer include:

  • Being the first senior Eurobond issue for Ecobank Nigeria, hence representing a sophomore international bond market Offer
  • The offer is the first African bank Eurobond issue in 2021
  • The debt raise represents the lowest (outstanding) Nigerian bank Eurobond coupon being oversubscribed by 400% on the order book

 

The new Eurobond offer followed a broad marketing campaign with both non-deal and deal roadshows, that involved consultations with over 90 institutional investors.

 

Managers at Renaissance Capital noted that "the investor engagement exercise generated over US$400m in IOIs, before books opening, allowing the formal announcement of the bookbuild to be opened shortly thereafter".

 

The co-lead book manager further observed that "the order book was opened at 8:15 am on the 10th of February with IPTs released at 7.750% area. Books saw strong momentum, fully covered shortly after opening, allowing the issuer to revise the guidance to 7.500-7.625%. The book continued to see strong demand, reaching c. 3.7x oversubscription at peak and so another revision to "7.125 7.250% WPIR" followed. The issue was finally launched at 7.125% (62.5bps below IPTs)" (see table 1 below).

 

Table 1 Art of the Deal

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Source: Renaissance Capital

 

According to available information, the transaction saw large demand from asset managers from Europe (including the United Kingdom (UK)) demonstrated by several large (over US$20-US$30m) tickets. The bond offer equally saw large interest from African accounts including solid orders from direct foreign investors (DFIs), and asset managers which brought US$300m in orders. The book runner placed over US$700m in orders as well as 30 sole orders of  US$240m (see table 2  below).

 

Table 2 The Book Building Workout  

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Source: Renaissance Capital

 

 

The senior Eurobond placement was a diamond-studded transaction for Ecobank Nigeria and should prove pivotal in turning around the fortunes of the bank that had slipped into sombre circumstances over the last half-decade. The Nigerian arm of the continental banking giant had fallen on modest times as foreign exchange translation effects and brutal provisioning for impairments squashed pre-tax profits, thereby hurting the Nigerian bank's performance within the group (see table 3 below).

 

Table 3 Ecobank Nigeria, Nurturing a Recuperating Operation

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Source: ETI



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Ecobank Highlights- leveraging The Giant

Ecobank Nigeria is a member of a leading Pan African banking institution - the bank is a member of ETI, a financial conglomerate with presence in 35 African countries, the Nigerian operations make up just over a fifth of the group's continental operations.

 

ETI owns 99.99% of the Nigerian bank's share capital and provides support for the bank's strategic goals which saw the continental behemoth ferry in US$64m in 2018 to stabilize the local bank's local business activities.

 

Ecobank Nigeria's business focus is to be a leading bank in the Treasury business in Africa's largest economy and to be ranked amongst the top 10 banks in providing access to government securities. The bank also targets being a pioneer in re-aligning various payments functions into one vertical structure focused on sales distribution capacity in local markets, global standard customer service experience, and end-to-end customer support.

 

The bank has over 18,000 agency locations, and in some circles is considered the market leader in pan-Africa trade and diaspora remittances apart from pioneering e-payment platforms in the country.

 

 

Table 4 Eyeballing The Book Run

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Source: Renaissance Capital

 

The new debt issue should jumpstart a more aggressive agency banking foray and provide the needed funds to upscale technology while supporting local product sandboxes and a vibrant tech foundry.

 


Ecobank Nigeria Announces the Pricing of Its Senior Unsecured $300m Bond

 

Ecobank Nigeria ("ENG" or "the Bank"), a wholly owned subsidiary of leading pan-African banking giant, Ecobank Transnational Incorporated (‘ETI’), the parent company of the Ecobank Group, announced that it has successfully priced its USD 300 million bond issuance maturing in February 2026, with settlement of the bond to take place on 16 February 2021.

 

The fixed-rate, US dollar-denominated bond, with a tenor of 5 years, carries a coupon rate of 7.125% and will be listed on the London Stock Exchange. It is accompanied by an Issuer Rating of B- from Fitch Rating Agency and S & P.  The coupon / yield represents the lowest ever coupon / yield achieved by a Nigerian financial institution for a benchmark bond transaction. At the peak of marketing the transaction, the issue was over 3 times oversubscribed, with significant interest from international investors. The transaction opened with Initial Price Thoughts (‘IPT’s’) of 7.75% and finally tightened to close at 7.125% on the back of robust demand. The strength and depth of the book demonstrated global investors’ strong appetite for the Ecobank franchise in Nigeria, a testament to the strength of the Ecobank Group. This transaction is the first non-sovereign bond from Africa in 2021 and is milestone capital raise for the banking sector in Nigeria, giving Ecobank access to global debt capital markets, and more favorable credit terms, commensurate with its strong financial position and robust capital structure. For international investors, it represented an attractive option to gain exposure to Nigeria.

 

This transaction followed a series of virtual global investor calls, with a number of blue-chip local, regional and international financial institutions, led by Citi, Mashreq, Renaissance Capital and Standard Chartered Bank as Joint Lead Managers and Bookrunners.

 

Commenting on the issuance, Mr. Patrick Akinwuntan, Managing Director of Ecobank Nigeria, said: "Despite the challenging global environment owing to the COVID-19  pandemic, and on the back of a successful NGN 50bn Tier 2 issuance in December 2020, ENG was able to successfully issue and price Nigeria’s first 2021 senior unsecured 5 year bond transaction. Ecobank Nigeria, through this issuance, is being  proactive in optimizing its capital structure as it continues to drive its medium term growth strategy of establishing itself as a leading facilitator of pan-Africa and international trade and payments."

 

Mr. Akinwuntan continued, "I would like to extend my appreciation to our regulators, the Central Bank of Nigeria, for their timely support and continuous guidance, in granting necessary regulatory approvals."

 

He further added: "We believe that our  capital raising activities are  key steps forward towards strengthening ENG beyond the regulatory ratios in addition to diversifying ENG’s medium-term financing sources. ENG is poised for continued growth in the Nigerian financial services industry."


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