By Omoh Gabriel, Business Editor
LAGOS â€” FOUR of the five banks cleared by the Central Bank (CBN) three weeks ago have put machinery in motion to raise N1.4 trillion corporate bond from the capital market.
The bonds may have a tenure of five years with fixed interest charge and may be convertible to shares later. The banks are opting for bonds as the shares market remains depressed and unattractive to investors. The banks in the process of raising funds through bonds are First Bank Plc, United Bank for Africa Plc, Guarantee Trust Bank Plc and Diamond Bank.
According to available capital market report, First Bank is seeking to raise the sum of N500 billion bond from the capital market. It has already gotten the approval of its shareholders to float the N500 billion corporate bond.
Another bank which is putting finishing touches to its arrangement to raise its capital base by N500 billion is United Bank for Africa. The bank will be seeking the support of its shareholders to approach the capital market to issue a corporate bond of N500 billion.
Another bank on the queue for corporate bond is Guarantee Trust Bank which Vanguard learnt is billed to raise from the capital market N200 billion. It is the same story for Diamond Bank that is gearing up to raise N200 billion. Of the four banks, only two have given official notice to the apex capital market regulatory authority of their intention to raise corporate bond from the capital market.
According to the Securities and Exchange Commission spokesman, Mr. Lanre Olori, First Bank and Guarantee Trust Bank have so far notified the Commission of their intention to raise bonds.
They have, however, not filed any former application to this effect, he said on phone last night. Meanwhile, Diamond Bank in its EGM public notice has listed the issuance of N200 billion bond as one of the issues to be discussed at its General meeting coming up soon.
First Bank on the other hand has already secured the approval of its shareholders through a general meeting of its shareholders. The banks will only go ahead with their intention if the regulatory authorities give them final approval to do so.
The banks are going into the bond market to raise funds to strengthen their balance sheet to enable them under take big ticket project.
Following the audit of the initial ten banks, CBN cleared five of them namely: UBA, First Bank, Diamond Bank, GTBank and Sterling Bank. It sacked the management of Oceanic Bank, Intercontinental Bank, Afribank, Finbank and Union Bank on the strength of alleged non-performing loans of over N700 billion.
Out of the 14 banks whose audit has just been concluded, some have been found wanting and asked to recapitalise and there are strong indications that they would also go for bond issue.