Wednesday, November 28, 2018 03:20 PM / by Emele Onu of Bloomberg
Access Bank Plc plans to redeem a $400 million subordinated Eurobond due in 2021 two years early as Nigeria’s fourth-largest lender seeks to reduce funding costs. Prices on the notes rallied the most since Aug. 10, pushing yields lower.
The bank will repay investors next year as the bond, issued in June 2014, no longer qualifies as capital five years after being sold, Chief Financial Officer Seyi Kumapayi said by phone from Lagos. Nigeria’s banking regulator allows lenders to count certain classes of debt and equity among the buffers they need to set aside to survive market turmoil.
Access Bank is rejigging its debt after yields on the 2021 bonds started rising from a record low in October last year amid an emerging-market rout. The lender is exploring other sources of funding, which may not be a Eurobond, to keep its capital adequacy ratio at about 20 percent, more than regulators require, the CFO said.
This may include retaining some of its profit as capital rather than distributing the cash as dividends to build buffers after settling the bonds, Kumapayi said. Access Bank, which has 4.5 trillion naira ($12 billion) in assets, has another $300 million senior bond issued in 2016 that will mature in October 2021.
Other big Nigerian lenders including Zenith Bank Plc, United Bank for Africa Plc and Fidelity Bank Plc raised dollar funds in the past two years to bolster their capital buffers after a 2016 contraction triggered a surge in non-performing loans.
Access Bank recently received a $50 million repayment on a loan to 9mobile, the company previously know as Etisalat Nigeria until it was taken over by creditors in 2017 after defaulting on loans. Nigeria’s fourth-biggest mobile carrier is repaying debt after being bought by Teleology Holdings Ltd. The repayment reduced the bank’s exposure to the firm to about 45 billion naira, Kumapayi said.
The lender’s shares rose by 5.6 percent to 7.50 naira as of 11.17 a.m. in Lagos, its biggest advance since Nov. 2. It’s also the biggest gainer in the Nigerian Stock Exchange Banking 10 Index, which measures the nation’s biggest lenders. Yields on the securities being redeemed early fell 29 basis points to 10.84 percent.
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