By Michael Eboh
UACN Property Development Company (UPDC) Plc has announced plans to utilise proceeds from its N15 billion bond issue to undertake major real estates development across the country, thereby contributing its quota to the reduction of Nigeria’s 17 million housing deficit.

Speaking at the completion board meeting of the company in Lagos, Mr. Larry Ettah, Chairman, UPDC, declared that the N15billion bond issue was oversubscribed by 100 per cent.

According to him, the public has a lot to benefit from the bond issue because there will more housing stock developed for Nigerians.

He said, “Remember we have in Nigeria a housing deficit of about 17 million. With this money available UPDC will be able to try its best at reducing that deficit as regards estate developments in Lagos, Abuja and Port Harcourt and other places in the country.

“For us, we will be able to get funding for some of the initiatives we have got. Before now we had been using short-term instruments for long_term projects.

“With this bond, we are now in a position to have access to longer term facilities like five years at a 10 per cent interest rate.

“This will reduce the burden created by the cost of borrowing. On the average, the development of a property takes between two to three years from conception to completion and it will be very difficult for you to make overdraft facilities and infrastructure instrument to finance such projects.

“Such instruments are volatile because banks’ interest rates can go up at any point in time. We are in a position, with this bond, to be able to have access to facilities on a long-term basis. We know the cost of our financing and then we will be able to use that money to match the kind of project we are doing.

“If we have a five-year facility we can do a two-year project. It is not good for you to take a 30-day facility to execute projects that will take up to two or three years.”

The application list for the issue opened and closed on 17 August, 2010, following a successful book building process which was significantly oversubscribed.

The bonds, which are being issued at par, have a tenor of five years and a coupon rate of 10% per annum.

The coupon on the bond will be paid semi-annually in arrears, while the principal will be repaid in six equal semi-annual instalments commencing February 17, 2013.

Ettah said at the completion board meeting of the company held in Lagos on Tuesday that the 10 per cent fixed rate non-convertible bond would be due for repayment in 2015.

Mr. Hakeem Ogunniran, Managing Director, UPDC, said that half of the proceeds from the bond would be used to finance outstanding short-term bank facilities and the rest to fund the development of various  estates, residential  and commercial, which the company is currently executing  all over the country.

He said, “If you look at the kind of business we do, we need long-term funding to finance our projects. The bond will give us the funding model that will allow us to finance our projects seamlessly without looking behind our back.”

Speaking at the end of the meeting, Ms Yewande Sadiku, Head of Investment Banking at Stanbic IBTC, commended the management of UPDC for the commitment they have shown towards executing the bond issue and for giving the issuing houses a free hand to guide the process.

She also pointed out that the issue presented institutional investors with a unique opportunity to diversify their fixed income portfolio, especially as UPDC is the only listed real estate company in Nigeria.

Mr Taiwo Okeowo, the Executive Director of FBN Capital, described the bond issue as a landmark transaction, being the largest corporate bond issue in the history of the Nigerian capital markets and the first bond issue to get a credit enhancement.

In her own remarks, Mrs Hamda Ambah, Executive Director of FSDH, applauded UPDC as trail blazers in the market by issuing the first non-bank corporate bond in recent times. She also noted that this is a sign of better things to come in the Nigerian corporate bond market.