The N100 billion bond being raised by Dangote Cement Plc is exciting some capital market stakeholders, as they have said it helped in broadening investment options in the fixed income market.
The Dangote Cement Series 1 5-year Fixed Rate Senior Unsecured Bond was issued under the company’s N300 billion shelf bond programme. Its book-building process commenced April 3 and closed yesterday, April 14, 2020.
The stakeholders believed that the bond further reinforced the potential depth of the Nigerian debt capital market and the ability of local corporates to fund long term projects from the domestic debt market.
For instance, Chief Executive Officer of Central Securities Clearing System Plc (CSCS), Mr. Haruna Jalo-Waziri, said: “With this debut N100 billion debt note, Dangote Cement Plc is once again reinforcing the capacity of the Nigerian debt capital market and setting a new benchmark in terms of size and pricing of corporate bonds. CSCS, being the depository to about half a trillion-naira outstanding corporate bonds from 23 issuers, we are excited to onboard Dangote Cement bonds into our depository post the SEC-approval of allotments.”
According to him, the management of CSCS was excited working with all stakeholders including the issuer, joint lead arrangers, exchanges and more importantly esteemed investors, pension fund administrators, banks, asset managers, trustees, custodians, and brokerage firms who would be participating in this landmark transaction.
“We earnestly look forward to the approved allotment schedule to promptly credit investors’ accounts and provide a consolidated view of all their investments across the capital market,” Jalo-Waziri said.
Some market analysts expect the transaction to close at a tight spread to comparable Nigerian sovereign debt note (i.e the 5-Year FGN Bond), given the strong investment grade rating of the Dangote Cement Series 1 Bonds, AA+ from Global Credit Rating (GCR) and Aa2.ng from Moody’s.
Market analysts also said the debt offering to be positive for the company’s equity valuation, as the fund is expected to finance expansion projects and refinance existing commercial bank debt, with expected cost-savings and a better realignment of the company’s capital structure.
With over 70 per cent market share of the Nigerian cement market and increasing earnings contribution from the African operations, Dangote Cement is positioned for growth, particularly as increasing adoption of the concrete option for road construction is expected to drive overall market demand, going forward.
According to analysts, beyond the impact of the Dangote Cement debt transaction on the primary market, the size and the strong investment grade rating of the Dangote Cement bond should enhance its secondary market liquidity, particularly as it is expected to be listed on both the Nigerian Stock Exchange and FMDQ Exchange.
CSCS noted that having full coverage of the market, it is well positioned to clear and settle all secondary market transactions on the debt notes, going forward, notwithstanding the Exchange, where it is traded.
With over N530 billion outstanding corporate debt issue and slightly less than N400 billion outstanding sub-national bonds, the Nigerian debt capital market is increasingly becoming a viable source of long-term funding for both Corporates and State Governments.
On completion of the Dangote Cement Bonds, the outstanding non-sovereign bonds is set to hit the N1trillion psychological mark.