Guaranty Trust Bank (GTB) on Monday launched a 5-y $400m Eurobond which pays a coupon of 6.0 percent and was initially priced at 6.125 percent, the equivalent of a spread over United States Treasuries (UST) of 469 basis points (bps).Analysts say that with an issuance size of $400m, the GTB 2018s should be eligible for inclusion in the JP Morgan Corporate Emerging Market Bond Index (CEMBI) with a broad inclusion threshold of $300m.The yield in the primary market also tightened to the lower end of the 6.125 percent – 6.25 percent guidance, according to bond traders monitoring the issuance.
The advertised initial size of the deal was $500m, but the issuer decided to reduce it to $400m, which possibly indicates that the bank was not willing to accept further bids at higher yields, say analysts.
“The smaller issue amount certainly suggests no immediate urgency for GTB to raise United States Dollars (USD). 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,” said Samir Gadio an emerging markets strategist at Standard Bank, London.
“The rationale behind the Eurobond sale now was also to take advantage of the cheap financing presently available.”
The new GTB bond is seen to be likely less liquid than the tightly held GTB 16s (USD500m), an outstanding GTB Eurobond due in 2016.
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,” said Gadio.
The new bond was trading below re-offer on Tuesday, at 98.375/98.875, or a mid-yield of 6.32 percent and a spread over UST of 489 bps.
Analysts say 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.
GTB in October announced nine months profit before tax (PBT) of N82.3 billion, a 7 percent increase from the 2012 period.