Rivers saves four per cent on infrastructure loan

Rivers State government has received the approval of the state House of Assembly to borrow  N100 billion to fund its infrastructure projects. According to Governor Chibuike Amaechi, the bulk of the loan would be used to make down payments before September 30, for power distribution projects that will ensure uninterrupted power supply in the state by 2012.

“Whereas we have more than enough generation capacity, distribution is still insufficient, “the governor said. The loan, being structured by GT Bank, will come at 8 per cent and is to be paid back in three years.  Amaechi says GT  Bank’s offer is right on time, as it has saved the state the need to borrow from the capital market at 12 percent.

“We are saving four percent on cost of funds with this transaction,” the governor  said. “With this loan from the GT Bank, we will now be seeking to borrow N150 billion from the capital market, depending on our cash inflows.”

Rivers State government was planning to issue a shelf registration for N250 billion at the capital market. A shelf registration is a procedure that allows corporations or government (as in this case) file one registration statement covering several issues over a period of time.

With the “registration on the shelf,” the corporation or entity can go back to the market with minimal procedure up to the limit approved, but often times may not necessarily reach that limit. However with the N100 billion loan, the state government will not be taking up the N250 billion bond shelf registration. The state will only draw down N30 billion of this facility in the first instance.