Ecobank announced on Wednesday that it has obtained approval from bondholders to raise its capital buffer, increasing it by 10%, to avoid defaulting on its 5-year senior bond.
This move is part of the bank’s effort to manage inflationary pressures on the naira, which had prevented it from meeting obligations on its US$300 million, 5-year senior bond issued at a 7.125% coupon rate per year, potentially leading to a covenant breach.
However, Ecobank confirmed on September 18, 2024, that bondholders have now approved a 10% increase in the bank’s capital buffer, the capital adequacy ratio, providing a solution to avoid defaulting on the bond, which is set to mature in 2026.
Ecobank is preparing to issue an additional $200 million in Tier 1 bonds, which will be divided into four tranches.
Alongside this, the bank is converting $200 million in dollar-denominated loans into naira, a strategic decision to protect against the volatility caused by the depreciation of the naira.
In addition, Ecobank has plans to redeem $200 million worth of promissory notes, set to mature in 2027, also in tranches. To further improve its financial position, the bank intends to offload $300 million in risk-weighted assets through loan sales to qualified third-party buyers.
Although Ecobank’s stock price experienced a temporary decline, dipping below N22 in May, the overall performance in 2024 has been notably bullish.
As of now, the stock is trading at N24, with potential to climb further, possibly reaching the high of N26.60 that was recorded in January 2024.