Market Intelligence

What does Lafarge issuance of Nigeria’s largest corporate bond mean for shareholders?


September 30, 2016 | 12:00 am
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Lafarge Africa said last week it has raised N60 billion ($184 million) by issuing three and five-year bonds through book building and in the process shaking up the sleepy Nigerian corporate bond market.

This is the largest corporate bond issue in history, according to data from the FMDQ daily quotations list.

The total value of corporate bonds in Nigeria before the Lafarge issuance was N535.2 billion, meaning the firm issued about 11 percent of the total outstanding corporate bonds at a go.

Lafarge Africa which is based in Lagos is the local unit of the world’s biggest cement maker, LafargeHolcim.

The firms issued a three-year bond at 14.25 percent to raise N26.38 billion and sold a five-year bond at 14.75 percent to fetch N33.62 billion naira.

Lafarge Africa has said it wanted to refinance some of its debt to cut interest rates on its domestic loans by about 4 to 5 percentage points.

In the half year period to June 2016, Lafarge’s Finance costs jumped 160 percent to N4.55 billion, from N1.75 billion in the 2015 period.

Nigeria’s yield curve has inverted as short term rates soar on tighter liquidity by the central bank.

This will hit profit margins of companies that borrow cash at short-term rates.

The sale of the debt should incrementally ease Lafarge’s high finance costs and help to boost margins going forward, assuming other all parts of the business remain strong.

The cement maker also said in April that it was marketing the bond to refinance some dollar-denominated debt at subsidiary United Company of Nigeria (UNICEM), which it bought a year ago.

The refinancing would include a $300 million loan from Lafarge Africa’s parent company.




September 30, 2016 | 12:00 am
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