Business
What Dangote’s Bond Success Means For Corporate Nigeria
By Emmanuel Aziken
Dangote Cement Plc, on Thursday, announced that its recently floated N100 billion fixed-rate bond had been 150% over-subscribed exceeding expectations.
It was the largest bond issue in Nigerian corporate history and is part of the N300 bond programme mapped out by Dangote Cement.
Coming against the background of general lethargy in the economy occasioned by the COVID-19 pandemic, and with many businesses closed, the news from Dangote Cement has really sent out some rays of hope for the economy.
Mr. Michel Puchercos, Chief Executive Officer of Dangote Cement who made the disclosure on Thursday said the total order book value of the receipts was N155 billion.
The bond issue which commenced on April 3 at a coupon rate of 12.50 percent closed on April 15.
Import Of The Successful Subscription
1. Refinances Dangote Cement’s Short Term Instruments to lower rates
2. Offers investment window for Pension Funds and other investment institutions
3. Creates a good feel factor for Corporate Nigeria.
The bond is expected to be majorly used in restructuring Dangote Cement’s exposure to short term financing and other more expensive commercial papers. It would also bring stability to the company’s financing instruments as bonds are long term instruments. This particular bond has a 2025 maturity date.
“Despite current market headwinds due to the COVID-19 pandemic, the transaction was extremely well received and attracted significant demand from a wide range of high-quality investors including domestic pension funds, asset managers, insurance companies, banks, and international fund managers,” Mr. Puchercos said in the statement.
“The transaction represents the largest corporate bond issuance in Nigeria’s debt capital markets, reflecting Dangote Cement’s strong credit quality as well as the resilience of the Nigerian debt capital market despite current global challenges,” Puchercos said in a statement.
According to him, the transaction would enable the company to lower its average cost of debt and extend the average maturity of its debt.
“It allows us to further broaden our sources of funding by accessing long-term debt at competitive costs from the capital market and builds further on the success of our domestic commercial paper programme.
“The success of this transaction, in the current challenging environment, illustrates investors’ continuous confidence in Dangote Cement’s strategy, strong cash generation and solid credit profile,” he added.
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