First Bank of Nigeria to raise $3.31b

First Bank of Nigeria Plc, the West African nation’s largest lender, plans to sell 500 billion naira ($3.31 billion) of bonds.

Shareholders will vote on the planned offering at an extraordinary general meeting in Abuja, the Nigerian capital, on Aug. 20, Lagos-based First Bank said in a statement published in the ThisDay newspaper today. The sale is subject to regulatory approval, it said.

“It’s very likely that this debt will be issued in tranches because it’s difficult to see them raising that amount of money all at once,” Samir Gadio, a strategist at Renaissance Capital in Lagos, said in a phone interview. “There are still liquidity constraints in the market so it will be interesting to see what the size is of the first tranche of this bond program.”

First Bank is likely to sell between 100 billion and 150 billion naira in the first portion of the bond program, while the securities may yield 200 to 300 basis points above the 10.5 percent coupons available on five-year Nigerian government bonds, Gadio said. The Nigerian lender has not yet indicated the duration or coupons the bonds will offer, Gadio added, citing a First Bank communiqué.

Nigeria’s Lagos state sold 50 billion naira of 13 percent bonds due February 2014 on Jan. 16 to fund infrastructure projects. The bonds attracted 18 percent more bids than the total amount offered, the Lagos-based Punch newspaper reported on Feb. 5, citing Rotimi Oyekan, the state’s commissioner for finance.

‘Public Offering’

First Bank said the bonds would be sold “by way of a public offering, private placement, rights offering, book-building process or other methods.” The issue will be “in such tranches, series or proportions” as directors deem fit, it said, without providing more information.

A First Bank official, who declined to be identified in line with company policy, said in a phone interview today shareholders will decide at next month’s meeting how the proceeds will be spent. He didn’t elaborate.

Earlier this month, First Bank announced annual profit slumped two-thirds to 12.6 billion naira after the global financial crisis reduced the value of its investments. The company, the largest on the Nigerian Stock Exchange by market value, posted a 40 percent increase in revenue to 218.3 billion naira in the 12 months through March.

Banks in Nigeria may have as much as $10 billion of toxic assets, according to Eurasia Group, a New York-based research company. The bad debt is partly the result of at least 1 trillion naira of so-called margin loans used by speculators to buy shares as equities soared almost 13-fold since 2000, according to Bank of America Corp. Nigeria’s All Share Index tumbled 70 percent in the 12 months through March. It has recovered 20 percent since then.

Source: Bloomberg