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Wednesday, March 22, 2023

Lagos Struggles to Raise N125bn Bond as PFAs Get Cold Feet

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The Lagos State Government has gone to the bond markets for new round of borrowings to the tune of N125 billion, however it is struggling to raise the amount and the closing of the Offer has been postponed numerous times as Pension Fund Administrators (PFAs), who are a major source of liquidity expected to invest in the bonds get cold feet.

The Lagos State Government says proceeds of the bond Issuance will enable it further accelerate the development of physical and social infrastructure in the State in line with the State’s THEMES Agenda.

THEMES is the acronym for Traffic Management and Transportation, Health and Environment, Education and Technology.

The Lagos State Government Series IV Bonds of up to N125 billion under the State’s N500 billion Bond Issuance Programme was expected to close on Friday, December 3rd.

Sources however tell MoneyCentral that Lagos needs to sort out issues with its Pencom certificate for the bond offer to be successful.

MoneyCentral gathered that despite the increase in yields to entice investors, the bond offer could still not get up to N100 billion in bids from potential investors.

“You know for Pension Funds to invest in a bond, the Issuer needs to get a PenCom compliance certificate. The compliance certificate they have been using is the one they got on the Programme Documents almost 3 years ago. So, some PFAs were cautious of indicating interest because they feel the compliance certificate has expired and need to be renewed. Hence, their order book could not get N100 billion, despite interest to slightly review the yield/price,” a market source told MoneyCentral.

The offer which opened on Friday November 19, 2021 is a 10 years fixed rate Senior unsecured note with minimum subscription of N10 million, and multiples of N5 million thereafter.

The new bond offer will push the states total outstanding debt to N1.135 trillion, according to data from the bond documents.

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