The COVID-19 pandemic is unarguably the greatest disruption of recent times. The world faces the existence of a real-life plague, but its impact has also been felt across industries, economies, markets, and more. Amidst these difficult times, some corporate organizations successfully raised at least N222.6 billion from the 24th of March to date, covering the toughest periods of the economic impact of the pandemic itself as well as the pandemic-induced lockdown.
Across the world, businesses and companies alike have sought out ways to curb the menace that is the pandemic through the introduction of cost-cutting measures to withstand the storm. However, in the midst of this, an array of companies have also sought out ways to raise finance to ensure their sustainability while also leveraging the relatively cheap opportunity to raise capital.
Data from the Nigerian Stock Exchange (NSE) reveals corporate bodies and the government have raised capital and facilitated secondary market trading activities worth over N1.8 trillion. A number of securities have also been listed on FMDQ. Methods used cut across Rights Issues, private placements, bond listings, etc., and they have been supposedly geared towards supporting the working capital needs of the organizations, facilitating business expansion, and more.
Listings over the period include; LAPO Microfinance Bank’s bond worth N6.2 Billion, NewGold ETF valued at N7 Billion, UACN Property Development Plc’s N16 Billion Rights Issue, Dangote Cement Plc’s bond worth N100 Billion, FBNQuest Merchant Bank’s Series-1 N5Bn Bond, Flour Mills’ N30 Billion Series 13 & 14 Commercial Paper programme, Primero BRT Securitisation SPV Plc bond worth N16.1Bn Bond, and the Golden Guinea Breweries Plc’s private placement of N1.2 Billion. Also listed are MTN Nigeria Communications plc’s proposed series of N50 billion and Transcorp Hotel’s N10 billion Rights Issue.
In addition to this, several Government Bonds worth over N797 Billion have also been listed within the past few months. Other companies have also listed capital financial issues include Guinness Nigeria (N5 billion) and United Capital (N20 billion) through commercial papers, also offering low-interest rates to suit the overall trajectory of the economy.
Of the various amounts listed over the same period, Flour Mills has raised N7 billion. FBNQuest Merchant Bank’s 5 billion issuance was 2.3 times oversubscribed but news reports are not clear as to how much was actually received; UACN Property Development raised N16 billion; Dangote Cement was 1.5 times oversubscribed, raising N155 billion; The Golden Guinea Breweries, Primero BRT Securitisation SPV, and NewGold ETF were all 100% subscribed at N1.2 billion, N16.1 billion, and N7 billion respectively. United Capital raised N5.3 billion in Commercial paper issuance and N10 billion in its Series 1 Bond issuance, and LAPO Microfinance is ongoing. This brings the total amount raised in the period to at least, N222.6 billion.
The attraction with raising capital in a COVID-19 era
The pandemic has brought about the world’s worst statistics and Nigeria is no exception with rising inflation juxtaposed with lower-than-normal interest rates – and that appears to be the catch. A common phenomenon across these bond listings is that many have been oversubscribed despite COVID-19 headwinds.
In other words, with very limited opportunities available across markets, investors have rushed at many of these bonds at their comparatively low coupon rates. Given that these investments are locked at fixed interest rates, companies now have the opportunity to piggyback growth strategies on affordable capital raising. With investors, on the other hand, grappling for opportunities to shield their funds from inflation, the situation appears to take the semblance of a win-win situation.