Fidelity Bank plans N50 bln bond issuance in Q4 to pay off debt
Fidelity Bank Plc on Tuesday said it plans to raise about N50 billion through bonds by the fourth quarter of this year as part of measures to part of existing debt.
The bank Chief Operations and Information Officer, Gbolahan Joshua, who disclosed this during investors conference call said the proceed of the bond issuance will be made to offset the existing N30 billion bond issued at 16.48 percent previously.
The bank is taking the opportunity of the fall in fixed income yields across the board in the domestic debt market to redeem old debt at a lower cost.
Bond yields have declined on the local debt market after an oil price crash triggered by the coronavirus pandemic caused foreign investors to dump naira assets, raising liquidity in the money markets.
Debt market yields have dropped from a high of 18 percent three years ago. Yields on the one-year treasury bill are quoted under 5 percent.
Many Nigerian companies have tapped the debt market, especially the commercial paper to raise cheap funds to pay off existing debt and increase working capital.
Dangote Cement is currently in the market to raise around N50 billion from the domestic debt market to boost working capital and offset the previously issued debt.
The local unit of South Africa’s telecoms giant, MTN Nigeria, Nigerian Breweries and United Capital and other companies have tapped the local debt market this year to raise over N500 billion to redeem existing debt and boost working capital.
Fidelity Bank also said it expects to see a 15 percent fall in profit this year compared with 2019, citing the impact of the coronavirus pandemic.
Nigeria’s growth contracted in the second quarter with fears that the economy could be heading into a recession in the next quarter.