Access Bank’s oversubscribed $500 million bond may help strengthen exchange rate

Access Bank Plc has successfully launched a $500 million Unsecured Eurobond, as part of its Global Medium-Term Note Programme.

The deal drew huge interest from top-grade investors globally, including the United States, Europe, the Middle East, Asia, and Africa, according to a notification signed by the company’s secretary, Sunday Ekwochi, and made public on Nigerian Exchange Limited’s (NGX) website.

The sale achieved the lowest (outstanding) Nigerian bank Eurobond coupon, backed by a $1.6 billion orderbook that was nearly 3x oversubscribed, making it the highest orderbook for a Nigerian bank Eurobond transaction ever.

As the unmet demand from the auction leaked into the secondary market, the bond is already trading at a premium to issue levels, with bids at 5.89% and offers around 5.78%.

What Access Bank said

Commenting on the Eurobond issuance, the Group Managing Director of Access Bank, Dr Herbert Wigwe, said, “At Access Bank we remain committed to our vision to become the World’s Most Respected African Bank and Africa’s Gateway to the World.

“The success of our US$500 million Senior Unsecured Eurobond is yet another stride towards the realisation of that vision and underscores our investors’ confidence in the Access Bank story.

“We are pleased with the diversity of the order book, and the success of this issuance further strengthens our resolve to deliver on our strategic objectives.” 

What our expert said

Wale Okunrinboye, CFA, financial analyst at Sigma Pension, believes that Access-Bank’s success is a result of a liquid global market.

“Globally, the bond-buying program of major central banks has unleashed a tidal wave of liquidity looking for assets to invest in. Access bank’s successful Eurobond sale which was oversubscribed is testament to the very liquid nature of global financial markets as demand was strong at nearly 3x the offer,”   Okunrinboye said.

He also stated that only companies that had large dollar receipts would go the way of Access Bank to generate funds through that means.

He said, “Most times before companies issue Eurobonds, they need to have a large dollar balance sheet. So typically, only companies with larger dollar receipts would be able to follow Access Bank’s move.” 

Wale opined that the success of Access Bank’s bonds had accelerated the timeline for FG bond issuance.

He said, “Originally FG planned to issue a Eurobond in October, but the success of the Access Bank bonds made the FG move up their timeline because the appetite for Nigerian bonds is high in the market. FG is likely to issue bonds next week.” 

Wale also believes that the FG bond will increase the Nigerian reserves and serve as a solution to the exchange crisis.

“Currently, external reserves is at 35 billion USD, so an issuance of the euro bond will increase our dollar reserves. This will act as great support and also help the CBN manage the FX crisis. So a successful Eurobond sale plus the IMF SDR should bolster CBNs ability to improve FX supply, which is positive for the exchange rate,” he added.

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