Fidelity Bank Sells $400m Eurobond

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Nnamdi Okonkwo
Managing Director of Fidelity Bank, Mr. Nnamdi Okonkwo

Fidelity Bank Plc has successfully issued a $400 million Eurobond. The bank issued the five-year securities with a 10.75 per cent yield on Wednesday. Fidelity is the third Nigerian bank to sell Eurobonds this year after bigger rivals Zenith Bank Plc and United Bank for Africa Plc, while also following the lead of the country’s government, which plans to more than double its outstanding dollar debt to $9 billion. According to Bloomberg, investors have piled into emerging markets to hunt for higher rates as those in developed nations linger near all-time lows.

The Eurobond is the first from Fidelity, which is rated B- by S&P Global Ratings and Fitch Ratings, or six steps into junk territory, since 2013.

Small- and mid-sized banks in Nigeria, Africa’s biggest oil producer, have struggled to raise capital as the economy recovers slowly from its worst slump in around 30 years, triggered by the 2014 collapse in crude prices.
Most of the dollar bonds issued this year with higher yields than those of Fidelity, which has $4.2 billion of assets, came from the North American corporate market, according to data compiled by Bloomberg.

Citigroup Incorporated, Renaissance Capital and Standard Bank Group Limited managed Fidelity’s deal, which included the repurchase of $256 million of its $300 million of existing dollar notes due in May next year.

“If you taken into account for the stage Fidelity is at in its evolution, the macroeconomic situation and the current apathy toward the Tier 2 banking space among investors, the pricing appears reasonable,” Head of Renaissance Capital in Nigeria, Temitope Popoola said.

“The other point is that we will likely see some tightening in the U.S. over the next few months and this should very likely lead to more expensive access to funding,” Popoola added.

“Time will tell but this rate may be considered generous over time.”
Exotix Capital, in a note to clients, had assigned a buy recommendation because of the new debt’s high spread over other Nigerian bank bond.