N15b Bond: Bauchi Meets Investors to Renegotiate Terms
By Modupe Gbadeyanka
Bauchi State government has held a meeting with holders of its N15 billion 7-year bond with a view to renegotiating the terms.
In 2014, the state government, under the previous administration, launched its N15 billion 15.5 percent series 1 fixed rate bonds due 2021 under the N30 Billion medium term note program.
The bond was launched to raise funds to complete a specialist hospital and ATB international airport in the state.
But the administration of Mr Mohammed Abdullahi Abubakar explained that it was renegotiating the terms as a result of the dwindling state allocations.
Mr Abubakar noted that his government wants to look for innovative ways to reduce spending while increasing revenue.
It was also to seek the support of the bondholders to restructure the terms of the bond by increasing the tenor to 5 years and adjusting the coupon to a competitive current market rate.
Recall that the drop in crude oil prices from $95 per barrel in September 2014 to circa $59 per barrel currently and decline in Nigeria’s oil production, Federal allocation to all tiers of Government has declined by as much as 62.2 percent.
The statement government said considering the fact that this allocation makes up the bulk of the revenue of most states, the drastic reduction has put a significant strain on the finances and cash flow of many Nigerian states, Bauchi State inclusive.
Accordingly, as part of the strategy towards ensuring that government delivers the much needed services residents of the state and continually meet its financing obligations, the cooperation of the bondholders was sought to support the State’s intention to restructure the Bond for better cash flow management.
During the meeting, the state government proposed to amend certain provisions of the Terms of the Trust Deed, especially the tenor of the Bonds. The tenor of the Bonds is to be extended by five years resulting to a modification in the maturity of the Bonds from 08 December 2021 to 08 December 2026. This amendment will have reductive implication on the monthly Debt service.
The government explained that the reduction from the cash flow will enhance the state’s ability to effectively pay workers’ salaries and implementation of capital projects across the state
Apart from the Governor, also present at the meeting from the Bauchi State government were the Permanent Secretary Ministry of Finance, Hashimu Abubakar Dori; the General and Permanent Secretary, Ministry of Justice Haruna Mohammed; and Director General, Debt Management Office, Bauchi, Nura Danmadami.
Professional parties present were; Planet Capital Ltd., United Capital Plc, Boston Advisory Ltd., ARM Trustees Ltd., FBN Trustees Ltd., STL Trustees Ltd., United Capital Trustees Ltd., UTL Trustees Management Services Ltd., PAC Registrars Ltd., George Ikoli & Okagbue.