Friday, October 14, 2016 2:45pm / Cordros Capital
Earlier today, Bloomberg reported that Access Bank PLC (ACCESS) successfully raised US$300 million via an Eurobond maturing in October 2021, at a yield of 10.75%.
This news follows an October 3rd announcement by the bank stating plans to refinance its US$350 million Eurobond which is maturing in July 2017 as part of a US$1 billion global medium term note programme.
The Bank also announced that exchange instructions in respect of US$113 million in aggregate principal amount of the existing Notes have been received by the Exchange Agent at or prior to the Exchange Deadline.
While we expect the refinancing arrangement will ease pressure on forex liquidity; at 10.75% the new October 2021 note was raised at significantly higher yield than the 7.25% on the July 2017 note. We expect this higher yield will materialize in higher funding cost adding pressure to the bank's net interest margin going forward.
We have incorporated our expectation for higher funding cost into our 2017 forecast and revised our target price lower to N9.18 from N9.28. Our revised target price represents a 63.9% premium to it current price of N5.60.
Consequently, we maintain our BUY recommendation on the stock.