$3 bn Eurobond, 30-year Nigerian bond oversubscribed

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8 years ago

The $3 billion Eurobond floated by the Federal Government through the Debt Management Office and the Ministry of Finance was oversubscribed by almost four times.

This is even as the 30-year Nigerian bond has been well oversubscribed, following a trend of lower sovereign and corporate yields. Though emerging markets bonds lost some ground in recent weeks in the secondary market, primary offers such as the 30-year Nigerian bond have been well oversubscribed, following a trend of lower sovereign and corporate yields, dealers said.

Specifically, a dealer noted that the sellers’ market is good news for emerging market borrowers, giving them access to funds at rates once afforded only to “investment grade” issuers. But it could lead to mispricing of riskier assets and threaten valuations in the long-term by encouraging borrowers to cut coupons on future issues.

Meanwhile, a statement released by Kemi Adeosun, Minister of Finance, the Eurobond had a total demand of $11.4 billion.

The debt instrument, which was released in two tranches, has a tenor of 10 years and 30 years.

Nigeria had earlier floated a $1 billion Eurobond in February and it was oversubscribed by eight times.

According to the statement, $2.5 billion of the proceeds will be used to fund capital projects in the 2017 budget.

“The full $1.5 billion proceeds of the 30-year notes are allocated to 2017 capital projects.

“Of the $1.5 billion of 10-year notes, $1 billion will be allocated to the 2017 capital budget, under our $2.5 billion approval from the national assembly, with the balance of $500 million allocated to refinancing of domestic debt, in line with our strategy to re-balance our domestic/international debt profile.

“Capital projects under the 2017 budget include road, rail, power and housing projects which are crucial to the delivery of the economic recovery and growth plan.”

Fund managers prefer new issues, particularly on corporate debt or debt issued by countries without a solid repayment history, because they typically sell at a discount to the secondary market. That has not been the case recently, Reuters quoted Samy Muaddi, a portfolio manager of T Rowe as having said, noting that the percentage of new issues in his fund has dropped from about 20 per cent of purchases to 12-15 per cent.