By Olasunkanmi Akoni & Monsur Olowoopejo
Governor Babatunde Fashola of Lagos State has disclosed that the second phase of N50 billion out of the N275 billion fixed rate bondÂ will be out for prospective investors.
The second tranche or Series 2 of the Stateâ€™s Fixed Rate Bond is the second part of the Bond issued by the State under its N275 billion Debt Issuance Programme which was first launched in 2008. It has a seven-year life span, 2010 â€“ 2017. The first tranche has a span of five years which expires in 2013.
Disclosing this at the investors forum, Fashola said that the measure to float the second bond was based on the success of the first bond which according to him was over -subscribed.
He reiterated that 75.54 percent of the proceeds from the sale of the Bonds would be used to finance on-going infrastructural projects while 24.46 percent would go for the refinancing of outstanding loans.
â€œThe second tranche will help us to keep that confidence and sustain the hope by continuing the many pending projects embarked upon by the state.â€
He stated that the proceeds from the sale of the bonds would be used to finance the construction ofÂ more roads, schools, hospitals, water supply, jetties and further help to complete the Lagos-Badagry expressway, light rail project, Lekki-Ikoyi Bridge among others.
The further said it would be used to create more jobs for the youths and help to put the state in a position to compete for global opportunities.
Fashola stressed that the judicious application of the proceeds from the first tranche has helped to keep local construction companies in business that have been able to employ over hundreds of thousands of youths, keep children in schools and also improve the standard of living in the state.
Fashola continued: â€œThe micro economic impact are being measured in the roads we have financed which is improving travel time, it is evident in the children and women hospital as three of them now give us 300 more bed space to ensure that women and children do not die at child birth, in recently commissioned water projects that have added over 50 million gallonsÂ of water to the supply, new classroom blocks, delivery of desk and chairs for teachers and students as a commitment to develop a human capital resources for stateâ€™s future.â€.
Also speaking, the Commissioner for Finance, Mr. Rotimi Oyekan said that the bond will mature by 2017 but the state government will ensure that there is a secondary market for any investor that wanted to sell his or her bond to have the opportunity of doing so.
The Commissioner further explained, â€œThis second tranche issuance is a NGN50 billion seven-year Fixed Rate Bond with a coupon band of 13 percent to 14.5 percentâ€. The first tranche had a coupon of 13 percent.
Oyekan who said the bond will be subscribed to at the rate of N1, 000 per unit further explained that the interest and redemption payments are to be funded directly and solely from the State Governmentâ€™s Internally Generated Revenue (IGR) as, according to him, â€œThe enabling law requires that 15 percent of IGR be credited to the Consolidated Debt Service Account (CDSA)â€.
â€œA sinking fund will be created and funded from the CDSA. The Sinking Fund is managed by Trustees who will pay Bondholders as and when dueâ€ the Commissioner said pointing out that the State has not issued an Irrevocable Standing Payment Order (IPSO) for Series 2 Bonds.
He listed the key transformational projects which, according to him, are central to the successful implementation of the 10-Point Agenda of the State Government to include, Lagos Urban Rail Mass Transit (LRMT) Scheme (Iddo to Ijoko via Okokomaiko and Marina), which he said will introduce a Rail System to be used by an estimated 500, 000 passengers per day, Lekki Free Trade Zone, Lekki-Ikoyi Bridge and Expansion of Lagos-Badagry Expressway.
Answering a questionÂ by one of the investors during the question and answer session, Oyekan explained that as in the first tranche, the State has appointed 16 primary dealers for the purpose of the programme pointing out they provide market for bondholders, who may at any time before the expiration of the bond, decide to dispose of them.
They include Access Bank Plc, Bank PHB, First Bank, Zenith Bank, Stanbic IBTC Bank, UBA Plc, Skye Bank and FCMB among others.
Earlier in his welcome remarks, the Managing Partner â€“Chapel Hill Advisory Partners, Limited, Mr. Bolaji Balogun, expressed delight that the State Governor, Mr. Babatunde Fashola (SAN), â€œhas been working very hard and delivering quantifiable resultsâ€.
He declared, â€œThe attendance given to this event today in spite of the short notice, is a testimony of the confidence we have in the transformation of the Stateâ€, adding that the second tranche of the Bond, though was delayed in coming, is welcome particularly at this time by the partners.
Also present at the occasion were representatives of the Joint Financial Adviser/Issuing Houses, members of the State Executive Council, Captains of Industry, investors and top government functionaries.