Category: Capital Market

Lekki Free Zone Company (LFZC) has launched a process to raise about N25 billion through issuance of long-term bonds.

The company will use the net proceeds of the new bond issuance to refinance existing credit facilities and to support funding of other capital projects.

LFZC Funding SPV Plc- the special purpose vehicle of LFZC, which had earlier raised N25 billion from the debt market, at the weekend, opened another book building to raise additional N25 billion.

The LFZC Funding SPV N25 billion Series 3, 20-year fixed rate senior guaranteed Bonds, is being issued under the company’s up-scaled N61 billion bond issuance programme. The book building is expected to close on Wednesday March 15, 2023.

LFZC SPV was set up by LFZC to raise finance through the listing of debt securities, which would be used to boost its business expansion exercise and to restructure the company’s debts over a specified period. The Lagos Free Zone, covering an area of 830 hectares, is the first private sector-led initiative in Nigeria.

Lagos Free Zone Company is the licensee and operator of the Lagos Free Zone – the first privately owned economic zone in Nigeria.

The 850-hectare Lagos Free Zone site included the Lekki Deep Seaport. The LFZC, which is promoted by Singapore-based Tolaram, is being developed as a “Live-Work-Play” community and equipped with built-up standard industrial and warehouse facilities.

About 23 registered enterprises including some notable international brands have an operational base in the Lagos Free Zone as at year-end 2022. The Lekki Deep Seaport construction was completed in October 2022 and the first commercial vessel berthed in January 2023 while the seaport was commissioned by President Muhammadu Buhari on January 23, 2023.

LFZ was first incorporated as a private limited liability company on January 29, 2002 as Lekki Export Processing Zone Limited but later became Lagos Free Trade Zone in 2006, after the status of the Zone was changed from export processing to a free trade zone in line with the Nigeria Export Processing Zones Act (NEPZA) of 1992.

The company was subsequently granted a licence, which is valid till 2067, to operate as a free zone and started operations in 2008. The company’s name was eventually changed to Lagos Free Zone Company with the overriding objective being the facilitation of industrial development and not just trading activities within the Zone.

LFZC’s current activities involve the development of a business model and a vision plan for the zone, land development, construction of buildings and infrastructure, operating the Free Trade Zone and leasing the developed land to enterprises registered within the Zone.

LFZC had earlier set a record with its N25 billion bond issue, which was then ranked as the longest-tenored corporate bond issue in the Nigerian debt markets.

To commemorate this notable event, FMDQ Exchange hosted Lagos Free Zone Company, represented by the Chief Executive Officer, Mr. Dinesh Rathi and other representatives of Lagos Free Zone Company. Also present at the ceremony were the sponsors of the issue and registration member of FMDQ Exchange – Stanbic IBTC Capital Limited, FCMB Capital Markets Limited and FSDH Capital Limited, as well as other parties to the issue.

Managing Director, FMDQ Exchange, Ms. Tumi Sekoni  said the listing was another highly exemplary and positive step towards addressing some of the infrastructural challenges in the nation.

She said FMDQ Exchange, being an Exchange with a passion for infrastructure and sustainable development in Nigeria, has again demonstrated its unflinching commitment in this regard by providing due diligence and availing its credible and efficient platform for the listing and trading of debt securities.

 Rathi said the issuance was a milestone transaction for LFZC as it was a testament to the capacity of the Nigerian debt markets as a veritable source of domestic capital for infrastructural development in Nigeria.

“The response to this bond programme further strengthens our commitment to realise our vision and thereby enhance Nigeria’s competitive positioning with our continuous focus on Ease of Doing Business parameters and world class infrastructure, embedded with all modern facilities.

“We are particularly excited by the confidence demonstrated by pension fund managers and other institutional investors at this milestone issuance, and we appreciate the team at Infrastructure Credit Guarantee Company Limited (“InfraCredit”), Stanbic IBTC Capital Limited and other parties to the transaction for this novel structure, which helps to de-risk the transaction and aligns the interest of different stakeholders” Rathi said.

Chief Executive Officer,  Stanbic IBTC Capital Limited, Mr. Funso Akere, said the bond Issuance was 139 subscribed and attracted wide participation from pension funds who have a growing demand for quality long-dated debt instruments.

The success of the transaction demonstrates investors’ confidence in Lagos Free Zone Company and the free zone’s impact on socio-economic and industrial development in Nigeria. We expect this should encourage other corporates to tap the domestic capital markets to raise local currency funding for viable infrastructure projects,” Akere said.

Chief Executive Officer, InfraCredit, Chinua Azubike, guarantor to the bond, noted that the success of special economic zones in Nigeria is critical to accelerating industrialisation, attracting local and foreign direct investment, job creation, and inclusive growth.

He however noted that one key barrier to unlocking this access to funding is enabling companies like Lagos Free Zone Company access up to 20 year local currency finance from domestic pension funds at scale to match the long-term lifecycle of infrastructure investment needed to develop these zones.

“It is evident that local pension fund investors are playing an important role in supporting private sector led infrastructure development in Nigeria,” Azubike said.

Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) has said the  implementation of the Pan-African Payment Settlement System PAPSS would encourage intra-African trade and aid diversification within the capital markets.

This was stated by Head, Office of the Chief Economist of the SEC, Dr. Okey Umeano during an interview in Abuja.

The Nigerian Exchange (NGX) and the Pan-African Payment Settlement System recently signed a Memorandum of Understanding to support cross-border payments across capital markets in Africa.

According to Umeano, the MoU begins to implement something that will make trades to flow easily across Africa.

“PAPSS makes it easy to trade across Africa. It makes Intra-African trade more efficient and we have always wanted it. It was created initially for just the usual everyday trade but we have always wanted it for the capital market because we think that if we can link the exchanges and the markets across the continent we will have a bigger opportunity set for everybody, so we have been working on that. 

“We have two projects the West African Capital Market Integration project and the African Exchanges Linkage project but the problem we have always had was how to settle, how do we make payments happen? If I want to buy a Ghanaian stock, do I have to change my naira to dollars and then from dollars back to cedi’s and all that. These where all the problems we had but with PAPSS, we can make these trades more efficient and easier. I can trade in naira and whoever I am buying from in Ghana or wherever in Africa receives in the local currency so this is a good thing and we thank Afrexim bank,” Umeano said.

He commended the NGX for taking the lead on this, the MoU allows them to stick this up with the Ghana stock exchange and we hope that other exchanges and other market players will key in and take this opportunity. 

He noted that given the way the markets are, this implementation will improve opportunities for diversification and make markets able to perform better.

“Given the way the markets are; it improves the opportunity for diversification. It improves the opportunity set everywhere. Let me give you an example, a couple of years ago when our market didn’t do so well, our bond market didn’t do so well we had issues around currency and we had the foreign investors leaving. It was reported that the market in Côte d’Ivoire, the eight nations French union their market did much better.

“So from a fund manager point of view if I could invest across the markets in the region, it will help my diversification, it will help improve returns, it will help my portfolios so I think that there’s appetite for it, I think that fund managers, pension, funds and all that will take advantage of it so I think it’s a good thing,” Umeano said.

On where the initiative is going next, Umeano stated that it is a very big step that is expected to scale to other markets and reap the enormous benefits adding that Nigeria and Ghana have always been traditional partners and I think it’s easier to start off with Ghana.

“I think that as time goes on we can scale to the BRVM market; we can scale even away from West Africa to other parts of Africa. I see this growing first, I would prefer this is me not NGX but I would prefer that the next stop becomes the Capital Market Integration project and it’s something that I am actively pushing that we can link these markets in West Africa first and PAPSS will be an enabler and after that we will go on to other markets but of course this decision is one that NGX has to make and other exchanges that join,” Umeano said.

According to him, in the integration project currently ongoing, the SEC and other regulators are encouraging issuers to be able to access markets that are different from the market of the primary issue, because when issuers know that the chances of their issues being more successful given that they have a larger market to sell into, it will increase or encourage them to issue more.

“If there’s an issue in Nigeria, anybody anywhere in Africa can take part in that issue in their local currency so this is very important. I see this as a very big one, for many years now the primary side of the market has not been very good. We have seen a lot of issues across the continent and even in other parts of the world.” Umeano noted.

He assured that regulators are in support of the initiative and are making efforts to harmonize regulations to support these laudable developments.

Regulatory fillings have shown that as of December, more than 95 per cent of Silicon Valley Bank’s (SVB’s) deposits are uninsured. 

Already, big names in Silicon Valley and the finance sector are calling publicly for the Federal Government to push another bank to assume Silicon Valley Bank’s assets and obligations after the financial institution failed last Friday.

Banking is an enterprise that relies as much on confidence as on cash — and if that runs out, the game is over.

The failure of SVB was caused by a run on the bank. The company was not, at least until clients started rushing for the exits, insolvent or even close to insolvent. 

The collapse happened after the bank’s management chose to sell $21 billion of bonds at a $1.8 billion loss. 

The bank’s management — with the help of Goldman Sachs, its adviser — chose to raise new equity from the venture capital firm General Atlantic and also to sell a convertible bond to the public.

The move forced the bank’s very smart client base of venture capitalists to direct their portfolio clients to withdraw their deposits en masse.

CNBC report, said the Federal Deposit Insurance Corporation (FDIC) will cover up to $250,000 per depositor and may be able to begin paying those depositors as early as Monday.

But the vast majority of SVB’s customers were businesses that had more than that on deposit at the bank. As of December, more than 95 per cent of the bank’s deposits are uninsured, according to regulatory filings. 

Analysts said the collapse could have been avoided — it happened because management bungled how it communicated to its customers and the public, and created a vacuum of confidence.

Many of the bank’s depositors are startups, and many are concerned that they will not be able to make payroll this month, which in turn could spark a wide wave of failures and layoffs in the tech industry.

Investors are concerned that these failures could reduce confidence in the banking sector, particularly mid-sized banks with under $250 billion in deposits. 

These banks are not deemed “too big to fail” and do not have to undergo regular stress tests or other safety valve measures passed in the wake of the 2008 financial crisis.

Venture capitalist and former tech CEO David Sacks called for the Federal Government to push another bank to buy SVB’s assets.

VC Mark Suster agreed, tweeting, “I suspect this is what they’re working on. I expect statements by Sunday. We’ll see. I sure hope so or Monday will be brutal.”

Since its founding almost 40 years ago, SVB had become a centerpiece of finance in the tech industry, particularly for startups and the VCs who invest in them. 

The firm was known for extending banking services to early-stage startups which would have struggled to get banking services elsewhere before generating stable cash flow. But the firm itself faced cashflow problems this year as startup financing dried up and its own assets were locked down in long-term bonds.

FTN Cocoa Processors Plc at the weekend completed a major debt-to-equities conversion programme aimed at rebalancing the assets structure and repositioning the agricultural company.

FTN Cocoa at the weekend listed 1.7 billion ordinary shares of 50 kobo each at 50 kobo each at the Nigerian Exchange (NGX) to mark the completion of its debt conversion programme.

With the listing of the additional 1.7 billion ordinary shares, the total issued and fully paid up shares of FTN Cocoa increased from 2.20 billion shares 3.90 billion ordinary shares of 50 kobo each

The debt conversion was part of efforts of the board and management to improve the depleted balance sheet of the company and support a turnaround process aimed at returning the company to profitability

The board of the company had earlier identified new capital injection as part of strategic initiatives to boost much-needed working capital as the cocoa-processing company continued to struggle with losses.

FTN’s shareholders’ funds had declined from N637.15 million in 2017 to N67.78 million in 2018, leaving the company struggling to meet the capital requirements for enlarged operations. The audited report and accounts for the year ended December 31, 2018 however showed that the agro-allied company grew its turnover by 636 per cent from N81.82 million in 2017 to N602.11 million in 2018. However, FTN recorded gross loss of N284 million in 2018 compared with a gross loss of N251 million in 2017. Net loss stood at N569.37 million in 2018 as against N762.42 million in 2017. Loss per share stood at 26 kobo in 2018 as against 35 kobo in 2017.  

The six-month report for the half year ended June 30, 2020 had shown that turnover dropped by 42 per cent to N217.27 million in June 2020 as against N373.52 million in June 2019. Loss stood at N189.12 million in 2020 as against N243.54 million in 2019.

The nine-month report for the period ended September 30, 2020 also showed that turnover dropped by 55 per cent from N501.97 million in third quarter 2019 to N227.26 million in third quarter 2020. Loss stood at N351.72 million in 2020 as against N354.48 million in 2019.

Directors of the company had attributed the negative bottom-line to inadequate working capital that has continued to hinder the company’s operations.

The board of the company had also blamed high cost of production and high finance expense for the negative performance, noting that inadequate working capital hindered the company from procuring raw materials needed to facilitate optimum production.

The board of the company said injection of new capital would support the ongoing turnaround programme and return the company to profitability.

Incorporated in 1991, FTN’s principal activities include processing of cocoa beans and palm kernel into cocoa cake, liquor, butter, powder, palm kernel oil and palm kernel cake. While it exported cocoa cake, liquor and butter, other products including cocoa powder, palm kernel oil and palm kernel cakes are marketed locally to manufacturing companies.

FTN started as Fantastic Abiola Nigeria Limited in 1991 and changed to Fantastic Traders Nigeria Limited in August, 1998. It adopted the current name FTN Cocoa Processors in December, 2007 and converted to a public limited liability company in February, 2009. FTN was listed on the Nigerian Stock Exchange in July, 2009.