At the time of writing, the COVID-19 pandemic has resulted in the death of more than 370,000 people in the world. The rapid spread of the novel Coronavirus has disrupted global economic activity and triggered volatility in the international and local capital markets. The uncertainty occasioned by the pandemic has also adversely impacted investor appetite for securities, including debt products.
Notwithstanding the effects of the pandemic, there remains some investor appetite for debt products issued by reputable or relatively healthy issuers with favourable ratings. Recently, two notable Nigerian companies successfully accessed the bond market through debut bond offerings. Dangote Cement Plc’s debut N100 billion series 1 bond offering was 1.5 times oversubscribed. Similarly, Axxela Limited, one of sub-Saharan Africa’s fastest-growing gas and power firms, through a special purpose vehicle issued its N10 billion series 1 bonds which recorded a 15% oversubscription.
Preparing for the Market
Market conditions are constantly changing as the pandemic situation evolves. As governments implement policies to re-open certain sectors of the economy based on public health guidelines, the capital markets may recover and see an improvement in investors’ appetite for debt products, especially debt products issued by small or mid-sized companies. Improved market conditions may open issuance windows for certain categories of issuers and these entities must be prepared to take advantage of the windows of stability.
A key step towards preparing for the market is the establishment and registration of shelf programmes by prospective issuers. Issuers with expired debt programmes should also consider renewing expired programmes with the Securities and Exchange Commission to prepare for favourable issuance windows.
This article was originally published by BusinessDay.