Nigeria's Access bank eurobond issues dominated by fund managers

Access MD, Wigwe

Nigerian lender Access Bank tested the market's boundaries with a rare Tier 2 offering from an African bank after issuing a $400 million 9.25 percent seven-year non-call five note at a yield of 9.50 percent.
A banker on the trade admitted the bank prioritised size over price, albeit the final level was tighter than initial price thoughts of high 9s.
Still, compared with fellow lender First Bank of Nigeria's outstanding 2020 Tier 2 bond (with a call option in 2018), Access Bank was offering investors plenty of juice.
FBN's bonds were quoted at 567bp over mid-swaps, according to Tradeweb, for a yield-to-call of 7.16 percent, according to a banker away from the deal, though it's a very illiquid note.
Access Bank issued its bond at 767.7bp over five-year mid-swaps. Both FBN and Access Bank have BB- senior unsecured ratings from S&P, though the latter is rated one-notch lower by Fitch at B.
Access also has an outstanding USD350m 7.25 percent 2017 senior bond, which was trading at a Z-spread of around 620bp, according to Tradeweb.
"One of the challenges was that local interest was at significantly tighter levels but the mid-high 9s [range] made more sense for the broader international community," said a banker close to the deal.
Many of those investors needed to be convinced to make room for more Nigerian bank paper in their portfolios after a big splurge in recent times.
Since May 2013, Diamond Bank, Zenith Bank, Guaranty Trust Bank, Fidelity Bank, as well as FBN, have all accessed the international capital markets.
In the end, though, the issue got a broad geographical take up with US accounts buying 35 percent, UK 26 percent, Nigeria (including offshore) 30 percent, Europe 7 percent and others 2 percent.
Fund managers got 70 percent of the paper, banks and private banks 20 percent, supranationals 6 percent and others 4 percent. The book was $600 million.
"Not bad in the end," was the verdict of one rival banker about the deal.
The Tier 2 offering follows recent shareholders' approval to raise $1 billion of capital from local and international markets. "This bond, the largest Tier 2 issuance by any Nigerian bank, will provide us with the additional capacity to focus on our strategy and deliver superior returns to shareholders," said Herbert Wigwe, chief executive at Access.
The bookrunners on the 144a/Reg S transaction were Citigroup, Deutsche Bank and Goldman Sachs.