InfraCredit guarantees Lagos Free Zone’s N25b infrastructure bonds

InfraCredit, a specialised infrastructure credit guarantee institution, has announced its guarantee of Lagos Free Zone Company’s (LFZC) N20 billion 20-Year Series II Senior Guaranteed Fixed Rate Infrastructure Bonds Due 2042 (the LFZC Series II Bond) under a N50 billion Debt Issuance Programme.

Leveraging the irrevocable and unconditional guarantee of InfraCredit, the LFZC Series II Bond reinvigorates the benchmark set by LFZC Series I Bond, as the second 20-year non-FGN Bond issue in the Nigerian debt capital market for the development of an industrial hub in Nigeria.

According to InfraCredit, enterprises operating in the Lagos Free Zone will benefit from various policy incentives underpinned by the legislative framework applicable for free zones in the country.

Backed by an irrevocable and unconditional guarantee from InfraCredit, LFZC Series II Bond is accorded ‘AAA’ long-term credit rating by Agusto and Co. and GCR, reflecting the highest degree of creditworthiness for these bonds.

The Series II Bond, a 20-Year Guaranteed Fixed Bond, was oversubscribed by 165% from institutional investors including ten domestic pension funds. The transaction is the second 20-year non-FGN Bond issue in the Nigerian debt capital market and reinforces the appetite of domestic institutional investors for long tenored non-FGN instruments.

The Series II Bond priced at a modest premium to the comparable FGN Sovereign Bond, provides a unique opportunity for pension fund managers, and other institutional investors to match their long-term liabilities with low-risk, high yield assets.

Speaking on the transaction, the Chief Finance Officer of LFZC, Ashish Khemka stated: “This is a milestone transaction for us at Lagos Free Zone Company and it is a testament to the capacity of the Nigerian debt market as a veritable source of domestic capital for infrastructural development in Nigeria. The response to this bond program further strengthens our commitment to realize our vision and thereby enhance Nigeria’s competitive positioning with our continuous focus on Ease of Doing Business parameters.

“LFZ further underscores Nigeria as a compelling industrial hub within the West African coast and ideally orients itself in anticipation of the imminent single market regime under AfCFTA. We are particularly excited by the confidence demonstrated by pension fund managers and other institutional investors at this milestone issue and we appreciate the team at InfraCredit, StanbicIBTC Capital and other parties to the transaction for this novel structure, which helps to de-risk the transaction and aligns the interest of different stakeholders”.

According to the CEO of InfraCredit, Chinua Azubike, “This is yet another milestone transaction, and we are pleased to have supported the successful issuance of this Series II Bonds following the maiden issuance in 2021, which is particularly significant due to its improved pricing, unprecedented scale and wide reach of domestic institutional investors.

“The success of special economic zones in Nigeria is critical to accelerating industrialization, attracting local and foreign direct investment, job creation, and inclusive growth, however one key barrier we have unlocked with our guarantee, is enabling companies like LFZC access up to 20 year local currency finance from domestic pension funds at scale to match the long-term lifecycle of infrastructure investment needed to develop these zones, it is evident that local pension fund investors are playing an important role in supporting private sector led infrastructure development in Nigeria.

“This Series 2 Bonds has further deepened the debt capital market, the oversubscription revalidates the appetite of domestic pension funds and other institutional investors in financing viable long term infrastructure assets.”