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HSBC Sells Largest Structured Note Linked to Nigerian Debt

By on May 9, 2012

HSBC Holdings Plc (HSBA) sold two structured notes tied to Nigerian government debt, including the largest credit-linked note referencing Africa’s most populous nation since at least 1999.

The two 10-month securities, one for $33.5 million and the other for $7.69 million, are tied to naira-denominated Nigerian treasury bills due March 2013, according to data compiled by Bloomberg. The zero-coupon notes were issued at a 12.4 percent discount to face value.

Banks have sold 108 credit linked-notes tied to Nigeria sovereign debt since 1999, the earliest Bloomberg has data for. Citigroup Inc. and Standard Chartered Plc are the only other banks to issue notes tied to Africa’s biggest oil producer this year, offering a total $51.8 million of the securities.

The largest notes tied to Nigerian sovereign debt prior to HSBC’s note were two $25 million securities sold by Citigroup and UBS AG in 2007, according to data compiled by Bloomberg.

Banks sold $15.5 billion of credit-linked notes this year outside the U.S., data compiled by Bloomberg show.

Investors use credit-linked notes rather than underlying bonds to enhance yields or get tailored maturities that may not be available in the bond market. Holders of the notes suffer losses if either the bank that sold the note or the entity that the note is tied to defaults.

Shani Halstead, an HSBC spokeswoman in London, didn’t comment on the structured notes.