Zenith Bank, Nigeria’s second-largest lender by total assets, has announced a relatively successful outcome of its Eurobond tender offer which closed Wednesday.
The bank, which was looking to redeem its $500 million 7.375 percent five-year Eurobond ahead of maturity in 2022, said it received valid tenders for the purchase of $392.596 million in the offer. This represents a subscription rate of 79 percent.
In a note published by the Nigerian Stock Exchange on Thursday, the lender said subject to the minimum denomination, it would pay for the notes it accepted for purchase pursuant to the tender offer, a price in cash equal to $1,085 per $1,000 in principal amount of the notes plus accrued interest amount.
The purchase price and accrued interest amount will be paid on the payment date expected to be on or about 16 September 2019, the bank said.
“The part Zenith Bank was unable to sell would still be a liability in its balance sheet but the result is still a largely successful tender offer,” said Omotola Abimbola, fixed income analyst at Lagos-based Chapel Hill Denham. “Interest rate environment is very low at the moment but high yield bonds issued by strong corporates like zenith remain attractive to many foreign portfolio investors.”
A Eurobond is a debt instrument that is denominated in a currency other than the home currency of its issuer. In Nigeria, these debts are less costly than local debts.
Zenith Bank had earlier announced plans to recall the dollar-denominated debt ahead of maturity on the back of strong dollar liquidity in its buffers.
The bank’s move to deleverage comes in a period some Nigerian lenders are recalling their Eurobonds as dollar-denominated lending opportunities thin.
Gbolahan Ologunro, a research analyst at Lagos-based CSL Stockbrokers, said private sector players are refraining from borrowing in dollars because the macroeconomic environment looks fragile and this has prompted banks to recall their dollar-denominated debt.
United Capital analysts, however, say fear of currency devaluation might be behind the trend.
In 2018, Fitch Ratings revised its outlook on Zenith Bank’s (Zenith) Long-Term Issuer Default Rating (IDR) to Stable from Negative and affirmed the rating at ‘B+. Also, S&P Global Ratings affirmed its ‘B’ long-term and ‘B’ short-term issuer credit ratings on the bank.
In its recently released half-year result for the period ended 30th June, 2019, Zenith Bank’s non-interest income surged 23.9 percent year-on-year to N109.73 billion, profit after tax grew 8.9 percent year-on-year buoyed by fees on electronic products, which grew by 1.7x year-on-year and contributed 43 percent to fee and commission income as compared to 22 percent in half-year 2018.
In the period, customer deposits increased 3.2 percent to N3.81 trillion, driven by the 27.4 percent and 4.6 percent growth in domiciliary and savings deposits, respectively.
The Board of Directors of the bank also announced the payment of an interim dividend of 30 kobo per share, payable on September 4 to shareholders whose names appear in the register of members as at the close of business on August 29.
Segun Adams
