FCMB issues a fresh N30 billion worth of commercial paper, as part of its N100 billion CP issuance programme. - The Gallant News


Saturday, 12 December 2020

FCMB issues a fresh N30 billion worth of commercial paper, as part of its N100 billion CP issuance programme.

 FCMB issued a fresh N30 billion worth of commercial paper, as part of its N100 billion CP issuance programme.

2020By Chidi EmenikeFCMB contact centre
First City Monument Bank has announced the issuance of a commercial paper worth N30 billion, as part of its efforts to generate additional source of short-term funds for the bank.

The disclosure was signed by FCMB Group’s secretary, Olufunmilayo Adedibu, and sent to the Nigerian Stock Exchange, as seen by Nairametrics.

The Commercial Paper (CP) has a tenor of 260 days and is part of a larger effort by the bank to raise a total of N100 billion through its CP issuance programme.
What they are saying
A part of the notification sent to NSE reads:

A part of the notification sent to NSE reads: “FCMB Group Plc (“FCMB”) hereby notifies the Nigerian Stock Exchange (“NSE”) and its esteemed shareholders that one of its subsidiaries, First City Monument Bank Limited (the Bank) is undertaking a Commercial Paper Issuance (“CP”) under its N100 billion-naira CP programme.”
What you should know
FCMB had earlier in March 2020 issued a N20 billion worth of commercial paper as reported by Nairametrics. In lieu of this, the latest notice raises the total sum of Commercial Paper issuance by the bank to N50 billion, out of its benchmark target of N100 billion.
In a similar vein, Nairametrics also reported that Dangote Cement, MTN, Nigeria Breweries and 9 other firms raised a total sum of N478.4 billion from commercial paper issuance between January and September, 2020.
According to Investopedia, Commercial paper is a type of unsecured, short-term debt instrument, issued by corporations to meet its short-term liabilities. It is unsecured because it is usually not backed by any form of collateral.
Commercial papers are usually targeted at institutional investors, such as Pension Fund Administrators and non-pension asset managers. Some high net-worth investors are also eligible to apply.
CONTINUE READINGDEBT SECURITIESDangote Cement, MTN, Nigerian Breweries, 9 others raise N478.4 billion from commercial papers
Nigerian companies raised a sum of N478.4 billion through Commercial Paper issuances between January and September 2020.

Published 21 hours ago on December 11, 2020By Research Team Dangote Cement, MTN, Nigerian Breweries, 9 others raise N478.4 billion from commercial papers
Dangote Cement, MTN Nigeria, Nigerian Breweries, and nine others raised the sum of N478.4 billion from commercial paper issuances between January and September 2020.

This is according to information sourced from all the major bond listings published during the year and also contained in the Nairametrics Deals Book, a compendium of various deals carried out within the Nigerian corporate space. 

READ: Stamp Duty on Nigerian Stock market transactions pegged at 0.08% from December 7

The year 2020 has been a precarious year for the economy due to the dual effects of Covid-19 and the crash in oil prices.
Despite the larger economy reeling from the crsis, the corporate world has recorded a massive improvement in their ability to raise capital in the debt market.
According to the report, 12 Nigerian companies raised the fund through Commercial Paper issuances from the capital market in nine months, despite the economic downturn experienced in Nigeria as a result of the Covid-19 induced lockdown and halt in most business activities. 
READ: Nigerian pension funds increase exposure to foreign money market funds

What is driving the raise?
The major reason for the string of capital raise was due to the low interest rates attributable to risk free securities such as treasury bill, FGN bonds and CBN OMO bills.

act markets
With interest rates low, corporates have rmoved to fill the gap by issuing debt securities at interest rates that are higher than risk free securities but affordable compared to previous times.
It is no wonder some of  the largest businesses in the country have tapped into the bind market to fill in the demand for fixed income debt securities.
While some companies used the funds to finance working capital for others it was a useful bridge to ahead of long term capital once the Covid-19 Pandemic receedes.
READ: FMDQ admits Axxela funding of N11.5 billion bond on its platform

Dangote Cement (N150 billion) 
Africa’s largest cement manufacturer and the most capitalized company on the Nigerian Stock Exchange, issued series 15 and 16 of its commercial paper in May 2020 and another series 17 and 18 in September 2020, summing up to N150 billion.  

Series 15 and 16 had a tenor of 175 days and 266 days with a respective yield of 5% and 6%, while the issued amount was N34 billion and N66 billion under its N150 billion commercial paper issuance programme. 
Series 17 had a tenor of 177 days and an implied yield of 4%, while series 18 had a tenor of 268 days with a 5% implied yield. They have a maturity date of 4th March 2021 and 3rd June 2021 respectively. 
According to the cement giant, the capital raised was aimed at funding short-term working capital requirements, as well as general corporate purposes. 
It is also worth noting that Dangote Cement also announced the successful issuance of N100 billion series 1 fixed rate Senior Unsecured Bonds in April 2020, which is due for April 2025. 
READ: Ripple gains 12%, CTO owns at least a million XRP

MTN Nigeria (N100 billion) 
The second most capitalized company on the Nigerian Stock Exchange completed the issuance of N100 billion commercial paper in June 2020.

MTN Nigeria issued commercial papers in two series (series 1 & 2) with the intent of raising N50 billion, but due to the oversubscription of the offer, opted to raise the bar by making an issuance of N100 billion
Series 1 had a tenor of 180 days and 270 days (CP2) with an effective yield of 4.9% for a N20 billion size (CP1) and 5.95% for an N80 billion size (CP 2) respectively. An issuance, which represents MTN Nigeria’s debut in the domestic debt capital market. 
According to MTN, the proceeds from the Commercial paper issuance was aimed at supporting the company’s working capital and general corporate purposes. 
READ: Union Diagnostics calls shareholders to update records with company registrars

Nigerian Breweries (N93 billion) 
The largest brewing company in Nigeria listed commercial papers over 7 series (series 5 – 11).

Series 5 and 6 of the programme opened on the 3rd of February, 2020; Series 7 and 8 opened on 6th April, 2020; while Series 9 – 11 opened on 26th October, 2020. 
Series 5 had a tenor of 180 days, Series 6 (270 days) raising up to N45 billion, Series 7 (182 days), Series 8 (270 days), raising N48 billion, Series 9 (120 days), Series 10 (183 days); while Series 11 was for a tenor of 240 days with an undisclosed issue amount. 
The Company stated that the Commercial papers programme was aimed at supporting the Company’s cost management initiatives with the overall aim of reducing its cost of fund, which also serves as an additional source of funding for the Company. 
READ: Dangote Cement shareholders approve N272.6 billion dividend payout

Flour Mills of Nigeria (N30 billion) 
The prominent food and agro-allied group announced the issuance of its series 13 & 14 N30 billion Commercial paper in April 2020, under its N100 billion Programme. 

According to information from the company’s disclosure released on the Nigerian Stock Exchange (NSE), proceeds realized from the issuance was targeted at strengthening its balance sheet.
Series 14 of the issuance had a tenor of 269 days with an implied yield of 7.75%; while its maturity date started at 21st January 2021. Breakdown of series 15 was not disclosed. 
READ: MTN Nigeria Communications Plc announces N100 billion commercial paper issuance

Stanbic IBTC 
Union Bank (N20 billion) 
Union Bank announced in January, the issuance of N20 billion Series 3 and 4 of its Commercial Paper Programme with a respective 180 days and 268 days tenor. 
Meanwhile, information from FMDQ showed a greater amount of issuance as a total of N8.89 billion was issued in its third series, while the fourth series raised up to N17.39 billion. 
The disclosure stated that the fund was intended to provide the Bank with further working capital. 
READ: Union Bank issues series 3 & 4 Commercial Paper, to raise N20 billion 


FCMB – N20 billion 
Sterling Bank – N15 billion 
Mixta Real Estate – N11.01 billion 
CardinalStone Partners – N7.1 billion 
Coronation Merchant Bank – N6.96 billion 
United Capital – N5.3 billion 
Guinness Nigeria – N5 billion 

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