GTBank Launches $400mn Eurobond at 6.125%

Guaranty Trust Bank (GTB) launched a 5-year $400 million Eurobond which pays a coupon of 6.0 percent and was initially priced at 6.125 percent, the equivalent of a spread over UST of 469 bps. While the advertised initial size of the deal was $500 million, the issuer decided to reduce it to $400 million, which possibly indicates that the bank was not willing to accept further bids at higher yields. In fact, the yield in the primary market was also tightened to the lower end of the 6.125 percent – 6.25 percent guidance.
Samir Gadio, analyst with Stanadrad Bank, London said the smaller issue amount certainly suggests no immediate urgency for GTB to raise dollars. The funds will likely go towards plans to finance medium-to-long run projects in power, potentially the oil and gas sector and a gradual expansion into Sub-Sahara Africa. The rational behind the Eurobond sale now was also to take advantage of the cheap financing presently available. This is expected to become more expensive next year in line with the tapering of the FED’s quantitative easing programme.
He said, even with a size of $400 million, the GTB 18s should be eligible for CEMBI Broad inclusion (the threshold is USD300m), but they are likely to be even less liquid than the tightly held GTB 16s ($500 million). The old bond currently trades at 4.85 percent, or a spread over UST of 431 bps. This means that the GTB 18s offered a pick-up of only 38 bps versus the GTB 16s at inception which, on a liquidity-adjusted basis, limits any yield compression potential. The new bond was actually trading below re-offer this morning, at 98.375/98.875, or a mid-yield of 6.32 percent and a spread over UST of 489 bps. We suspect that there should be reasonable support for the GTB 18s from both offshore investors and Nigerian financial institutions in the 6.25 percent – 6.50 percent area, especially given the bank’s track record and robust fundamentals.

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