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Asset Corporation issues N1.7tr tradeable bonds today

By on April 6, 2011

The Asset Management Corporation of Nigeria (AMCON) will today issue about N1.7tr bonds to further strengthen the financial system. The sum will comprise of N1.1tr to replace the initial consideration bonds issued to 21 banks on December 31, as well as another N600bn bonds to buy up the margin related non-performing loans of non-rescued banks.

AMCON executive director, finance and operations, Mofoluke Dosumu who confirmed this, said the government has granted its entire request for waivers, preparatory to the listing of the bonds on the Nigerian Stock Exchange.” The waivers have been obtained,” she said. “We are issuing the bonds tomorrow (today) and they have been registered.” AMCON had scheduled to list the bonds on March 31 but had to shift the date due to the non-issuance of the waivers. The waivers include guarantee by the government, allowing it to be computed as liquid asset, as well as making it tax-exempt in order to make the instrument attractive to investors.

Price discovery

In addition, AMCON will also issue another N30bn bond today in a bid to test the appetite of the market for its own instruments and the appropriate price that would be attached to it. Sources close to the deal confirmed that the book building process, whereby investors indicate their interest and bid prices for the bonds, closed yesterday while the instruments will be allocated today. “The N30bn is price discovery bond to know the real worth of AMCON bonds,” said a securities trader who did not want to be named.

He said with the waivers granted, the AMCON bond will become as attractive as the federal government bonds. “AMCON bond is more secured than the FGN bond as it is going to have an enhanced yield because it is benchmarked against the three year FGN bond. It will be sold with a coupon rate of between 10.8 and 11.8 percent.”

Securities lending

With this issuance, AMCON will take over loan assets of the banks. Briefing the financial community in Lagos recently, managing director of AMCON, Mustafa Chike Obi said he would encourage securities lending as a means of deepening the financial market. “I think we must have securities lending to encourage investors to express themselves. Luckily, AMCON is going to end up with a large portfolio of securities which we pledge to hold for two years at the minimum. I want to tell you, if you want to borrow AMCON’s portfolio of shares, you have those already. That will be a start,” Mr. Chike-Obi said.

Source : 234next