Nigeria's Zenith Bank seizes tightening spread in eurobond issue

Nigeria's central bank gov designate and Zenith chief. Emefiele

Global analysts said Nigeria's Zenith Bank took advantage of a tightening in emerging market spreads over the past couple of months to become the second African issuer to raise funds internationally this year.
The lender, Nigeria's largest by Tier 1 capital and second largest by assets, raised $500 million through a debut five-year note.
 After meeting investors in Europe and the US, the lender opened books on the trade on Thursday, with initial price thoughts in the high 6 percent area.
After collecting orders worth $1.3 billion, leads Citigroup and Goldman Sachs launched the trade at the final yield of 6.5 percent, equivalent to a z-spread of around 461 basis points (bp), according to Richard Segal, fixed-income analyst at Jefferies.
At those levels, the deal offered a pickup of around 15 bp over similarly rated Guaranty Bank, whose November 2018s were spotted trading at a spread of around 445 bp.
"We'd consider this a respectable new issue concession, but clearly nothing outsized," said Segal.
A compression in spreads across emerging markets combined with the trade's rarity value, helped push pricing inside the initially targeted level.
"In such a bullish context, the typical demand-supply mismatch for African US dollar fixed income assets and especially corporate Eurobonds assisted the sale," noted Standard Bank's Samir Gadio in a note to clients.
Investors in the US took 44 percent of the new notes, followed by the UK with
35 percent, the rest of Europe with 9 percent, Nigeria with 6 percent and others with 6 percent.
The relatively low participation of onshore accounts compared to previous Eurobond issued by Nigerian banks suggests Nigerian accounts will likely get involved in the secondary market, said Gadio.
By investor type, fund managers received 74 percent of the final allocation, followed by banks and private banks with 15 percent, hedge funds with 9 percent and insurance and pension funds with the remaining 2 percenet.