Ecobank Launches New 5-Year Eurobond at 9.75% Re-Offer

Proshare

Friday, April 12, 2019   / 02.56PM / By Teslim Shitta-Bey, Proshare      

 

Ecobank Transnational Inc. (ETI) yesterday April 11 2019, floated a $540m Eurobond Issue to refinance existing debt obligations and provide additional fund to grow its continental operations. Moving into what the bank has called the ‘execution’ phase of a five year strategic plan which commenced in 2016,the Eurobond Issue  with a coupon of 9.75% (one of the highest for recent emerging market Issues) would reposition the bank’s balance sheet and possibly increase its return on equity (ROE) in FY 2019.

But more importantly with this transaction, ETI will be the first financial institution in Africa to raise a Eurobond at a holding company level. This is a major milestone for private debt Finance in Africa. The debt would perhaps support the bank’s forward guidance of growth in its loan portfolio of between 8 and 10% in 2019, thereby lifting its profit after tax expectations from $328.6m in 2018 to $358.7m for FY2019 (subject to Q1 2019 Results yet to be released by the bank).

Some analysts have complained about the cost of the five year unsecured euobond note at 9.75% implying that the Issuers coupon rate was steep, but the bank on enquiry by Proshare explained that, “as this is a debut Eurobond, this comes with a new-issuer premium and also a holdco structure premium, as ETI is a Holdco and not an operating banking entity”.

The new Eurobond Issue comes two years after the bank issued a $400m Convertible Bond in April 2017.

 

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