DMO issues N50bn bond

Gbola Subair, Abuja

Abraham Nwankwo, Director General,
Debt Management Office

The Debt Management Office (DMO) has begun the year on a promising note with the issuance of N50 FGN bond in the primary market.

The offer to the market, totaling N50 billion, were in two tranches of N30 billion and N20 billion with tenors of 3 and 5 years, respectively.

The 3 years offer was a re-opening of the December 2007 issue of the same tenor, while the N20 billion offer is a new 5 years issue which will be re-opened in subsequent months.

For the 3 years tenor, the market responded positively with bids received amounting to N49.39 billion. This translates to over subscription of N19.39 billion.

The total number of bids stood at 85, out of which 44 were successful. The range of bids varied from 7.1 per cent to 11.00 per cent. The marginal rate was 9 per cent, which is the rate that cleared the amount on offer.

However, the coupon still remains 8.99 per cent as this was the re-opening of the December 2007 issue, which already carries a coupon of 8.99 per cent per annum.

The above development implies that the issue of December 2007 has increased from N30 billion to N60 billion because this new issue (re-opening) is fungible with the old issuance, thereby further deepening the liquidity of that tenor.

An issue is said to be fungible with the original issue which was re-opened because it has the same characteristics with the old one, that is, the same coupon, interest payment date and maturity date.

The re-opening of issues was first introduced into the Nigerian FGN Bond market with re-opening of the 10 years tenor FGN Bond issued in August.

Similarly, the 5 years bond had an offer amount of N20 billion that was also over subscribed by N25.36 billion. The total subscription was N45.36.

The range of bid varied from 7.95 per cent to 12.5 per cent, while the marginal rate stood at 9.45 per cent.

This rate will now apply to all successful bidders. In addition, the rate will apply to subsequent issues of 5 years tenors which will be the re-opening of this issuance in the course of the year.

It is pertinent to reiterate that successful bids for the 5-year offer were allotted at the marginal rate of 9.45 per cent, while those of 3-year, which is a re-opening of December, 2007 offer shall maintain the coupon rate of 8.99 per cent.

The FGN Bond issuance is not only to support government financing needs but also designed to create benchmark yield curve, which will facilitate access to long-term financing, for the private sector in line with the Financial Sector Strategy (FSS) 2020.

FirstInland Bank markets offer in US, UK

Lanre Oyetade, Lagos

The Initial Public Offer (IPO) of First Inland Bank Plc took yet another enterprising and innovative dimension at the weekend when the offer road shows and investors’ forum were held outside the shores of the country.

Managing Director and Chief Executive of the bank, Okey Nwosu, who led other management team of the bank, including Executive Directors Dayo Famoroti and Nuhu Aliyu to the London, United Kingdom road show, said the offer was the bank’s offering for investors in the new year.

At another road show held in Houston, Texas, United States of America at the weekend, the Managing Director assured the would-be investors of the safety of their funds as well as high and reasonable returns on their investments in line with the provisions in the prospectus.

According to him, the N89.6 billion sought by the bank in the N5 billion ordinary shares offer and the N4 billion preference shares offer, as well as the N968.863 million right issue were aimed at expanding the bank and improving on its Information Communication Technology infrastructure.

The purpose of the offer is to use the N89.636 billion-estimated net proceed from the offer to finance the expansion of branch network, upgrade the information technology infrastructure, recapitalise/develop subsidiaries and provide working capital. The estimated completion period of all the work is two years at the maximum.

According to him, the progress of the FIB in the past “is due to your support of the bank. As we are advancing the fortress of development, we plan to do lot of activities that will ensure that any investor gets capital acquisition and dividend income. Therefore I would like to recommend the offer to any investor.”

On the issue of share certificates delay, he reassured the investors that the bank has put in place a detailed plan to overcome the challenge. Interestingly, some of the problems that are statutory have been removed such as shares verification, which will now be done post-allotment.

“The challenge now is to make returns early as well as file documents at the right time. We have set up a team that will ensure things go right from day one, and above all ensure that records that are coming to us are properly reconciled before they are forwarded to the regulatory authorities,” he stressed.

According to him, the share certificates should be ready not later than six weeks after allotment and will be dispatched to investors. “We want to set a record as the fastest offer to get at conclusion in the history of the banking consolidation, to date,” he said. On the acquisition plans, he said the bank is looking at the option of taking up an existing business as the first strategy, adding, “on our expansion plans outside the country, whichever bank we acquire, the overriding objective will be to add value to shareholders by taking advantage of our earlier experience.

First Inland Bank is targeting in gross earnings N50 billion and N76 billion in year-end 2008 and 2009 with profit after tax projected at N8.9 billion and N24.9 billion in the next two years. The bank promises shareholders whopping dividends from 2009 beginning with 31 kobo per share. The bank in the past financial year to April 2007, posted a profit after tax of N6.5 billion. Total assets and contingents rise to N275.7 billion from N138.7 billion in 2006, representing 99 percent growth. Customer deposits grew to N147 billion up from N62 billion in 2006, showing a positive variance by over 137 percent.

Even as the bank’s offer ends on Thursday January 31, indications are that the shares offering will be more than 100 per cent subscribed given the fact that the bank is not likely to extend the IPO beyond this week.