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Fidelity wins award

How Fidelity Bank sold highest-yielding Eurobond this year

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Leading retail banking giant, Fidelity Bank is the third Nigerian bank to sell Eurobonds this year after Zenith Bank Plc and United Bank Plc, but it sold the highest-yield from emerging markets before higher United States interest rates push up borrowing costs.

Nigeria is currently targeting about $9bn from its Eurobond now in the market.

Last Wednesday, the bank issued $400m of five-year securities with a 10.75 per cent yield on a guidance of about 11 per cent.

There are serious indications since the beginning of the second quarter that 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. The yield fell to 10.27 per cent by 11:08am in Lagos last week Thursday.

Business Hilights can authoritatively report that Fidelity bank was among the early birds that blazed the trail and came out top gainers amongst others in the race after all.

However, additional findings last week showed that the yield on UBA’s $500m five-year notes fell 13 basis points to seven per cent on Wednesday, extending their drop since they were issued in June at 7.88 per cent. Zenith’s notes, also due in 2022, traded at 6.06 per cent.

Analysts’ say both small and mid-sized banks in Nigeria have been struggling 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 $4.2bn of assets, came from the North American corporate market, according to data compiled by Bloomberg.

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

According to the head of RenCap’s Nigerian unit, Temitope Popoola, “If you 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”.

Continuing, he said “The other point is that we will likely see some tightening in the US over the next few months and this should very likely lead to more expensive access to funding”.


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