Fidelity Bank sells $400m Eurobond, re-purchases $256m

.Records largest Nigerian new issue, liability offering

Motolani Oseni

Fidelity Bank Plc priced a highly successful US$400 million 5-year Eurobond with a 10.50 per cent, in what is regarded as the largest combined new issue and liability management offering ever by a Nigerian issuer.

The lender represents the third Nigerian bank to sell Eurobonds this year, after Zenith Bank Plc and United Bank for Africa Plc, while also following the lead of the country’s government, which plans to more than double its outstanding dollar debt to $9 billion.

The Eurobond is the first from Fidelity, which is rated B- by S&P Global Ratings and Fitch Ratings.
However, the tender offer was very successful with the repurchase of $256m of its $300m existing USD notes due in May 2018. This represents a tender hit ratio of 85 per cent, one of the best results recently achieved by peers.

Proceeds from the new US$400m issue due 2022 was used to finance the tender offer of $256m; and the balance (net issuance cost) will be used to support the trade finance business of the bank.

The company conducted a focused marketing campaign, on the back of the strong tender offer and new issue investor feedback. The strong demand for the new issue and the transaction structure favouring existing holders during the new issue allocation, led to a high conversion ratio with over 60 per cent of the holders of the old notes subscribing for the new notes.

The landmark Eurobond issue was 2.0x oversubscribed (Order Book of $630m), with the final coupon ultimately set at 10.50 per cent. The transaction achieved a wide market distribution with over 100 investors from the UK, US, Continental Europe, Asia and Africa subscribing to the new issue.

Commenting on this development, Managing Director, Fidelity Bank, Mr. Nnamdi Okonkwo, said: “We are delighted to have successfully completed the offering, and we believe the transaction has a big positive signaling effect. It paves the way for other banking institutions, especially the Tier 2 Banks in Nigeria to explore the Eurobond source of funding in the international arena and talk to the global emerging markets investor community as Nigerian market rebounds and we see bigger demand for strong local stories.”

Fidelity Bank’s $400m issue demonstrated strong trading upon entering the market post pricing, cementing the Eurobond’s robust position.

Fidelity is a full-fledged commercial bank operating in Nigeria with over 3.8 million customers who are serviced across its 240 offices and various digital banking channels.

The bank is focused on select niche corporate banking sectors, Small and Medium Enterprises (SMEs); and is rapidly implementing a digital based retail banking strategy which has resulted in the following over the last 3.5 years; a 93 per cent growth in savings deposits, 50 per cent customer enrollment on debit cards and 30 per cent of its customers now using its flagship mobile/internet banking products.

Interestingly, Fidelity Bank’s recently released its Audited H1 2017 results showed a remarkable improvement on all indices, with Gross Earnings increasing by 22 per cent to N86bn, expenses declining by 2 per cent to N31bn and Profit Before Tax (PBT) increasing by 67 per cent to N10bn.

Citigroup Incorporated, 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.

“If you take into 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,” Head of Renaissance Capital in Nigeria, Temitope Popoola said.

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

Fidelity Bank was also recently rated the 4th Best Bank in the Retail Segment in the 2017 KPMG BICSS, the Best Bank
in Mobile Banking and the Most Improved Bank in Corporate/Investment Banking at the 2017 Businessday Banking Awards.