Leadbank Guarantees Cross River State Bond
By Uche Obike
Those who have followed the track record of Leadbank Plc as regards activities in the Nigerian capital market, especially as they concern issuing houses business over the years, would agree that before Leadbank could make a public statement concerning any particular issue, it had done its homework properly.
The recent statement by the bank expressing its confidence in the on-going Cross River State Tourism Bond has raised further the credibility of the bond at market place.
Leadbank has an impressive record for packaging successful Offers in the Nigerian capital market.
Lead Bank has carved a niche as an issuing house. It has won many times, the International Reuters/SBA Award as the best issuing house in Nigeria.
Lead Bank has over the years acted as issuing house to United Bank for Africa Plc, Afribank Nigeria Plc, LASACO Assurance Plc, Gateway Bank Plc, Nigeria - German Chemical Plc, First bank of Nigeria Plc, Union Bank of Nigeria Plc and few others. And, the stories remained success stories for the issuers.
Speaking at the Completion Board Meeting held on Monday, May 24, 2004 at the Calabar Library Complex, Calabar, the Managing Director of Leadbank Plc, Mr. Abimbola Olashore expressed confidence in the full subscription of the Cross River State redeemable bond.
"We are very optimistic that, the investing public, both private and institutional will find this investment instrument very attractive because of its uniqueness. It is targeted towards tourism development and you know that tourism is a 'gold mine' in terms of returns. Moreover, the bond is fully secured by an Irrevocable Standing Payment Order (ISPO) and managed by credible and reckonable Trustees," Olashore said
Expressing his optimism on the success of the project, Governor Duke said the Completion Board Meeting where all the stakeholders signed to confirm their stakeholdings is a major step to putting the dream of making Cross River a tourism spot a reality.
"I can say with some certainty that in the next twelve months, the face of Calabar tourism will have changed significantly," he said.
According to the Governor "the purpose of the bond issue is for the planned upgrade and expansion of the Obudu Ranch Resort to international standard which will enable it compete with the very best tourist destinations around the world."
The project, he added, involves expansion upgrading of existing facilities, including the construction of additional chalets, expansion of road networks, development of a Presidential Retreat and the extension of the airstrip to accommodate large aircraft.
Application for the Cross River State N4 billion Floating Rate Redeemable tourism development bond opened Tuesday, June 1, 2004.
Leadbank Plc, is the Issuing House to the offer which has restated confidence in the full subscription of the bond by investors.
The bond, which closes Monday, June 29 was secured by an Irrevocable Standing Payment Order issued by the Cross River State Government as a first charge upon and payable out of the Statutory Allocation of the State, and payment of the principal and coupon of the bond from a sinking fund account to be managed by the Trustees as set out in the Trust Deed.
Following the agreement between Cross River State, Leadbank and other stakeholders, the bond "shall be redeemed at par in seven consecutive and equal semi-annually instalment of N571.428 million each on Monday, May 31 and November 30, of each year that the bond is outstanding, beginning November 30, 2004 with a provision for early redemption at the option of the State, subject to giving three months notice to the bond holders."
The offer sells for a minimum of 100 units at N100 each, that is a minimum of N10,000 and multiples of 10, that is N1,000 thereafter. The interest rate on the bond shall be 5.5 per cent above the Central Bank of Nigeria's Minimum Rediscount Rate (MRR) presently 15 per cent. The interest rate on the coupon shall not exceed 25 per cent per annum (PA) and shall not be less than 18.5 per cent P.A.
It could be recalled that the Director General of the NSE, Dr. (Mrs.) Ndi Okereke-Onyiuke recently called on market operators to support the Cross River State bond to succeed so as to further give tourism industry in the country a boost.
Meanwhile a bridging facility of N2 billion was approved by a consortium of banks to commence the immediate development of the Resort pending receipt of proceeds from the bond issue.
The Offer prospectus reveals further that "as at April 2004, the amount outstanding under the bridge finance is N1.75 billion. The bridge facility will be repaid from the proceeds of the bond issue."
Part of the letter from the Issuing House dated May 24 2004, signed by Olashore and addressed to the Executive Council, Cross River State Government, Calabar, on revenue and expenditure and the cash flow projection for 2004 to 2007, notes that "having considered the assumptions made by you as well as accounting basis and assumptions reviewed by Akintola Williams Deloitte, we consider that the projections, for which the Cross River State Executive Council is responsible, have been made after due and careful inquiry."
In its own letter, also date May 24, 204, addressed to the Executive Council, Cross River State Government, and copied to Leadbank, Akintola Williams Deloitte said "we have reviewed the accounting basis and assumptions for the revenue and expenditure projections of Cross River State Government for the five years to December 31, 2007 for which the Executive Council of the state is solely responsible."
The letter concludes that "in our opinion, the revenue and expenditure projections so far as the accounting basis and assumptions are concerned, have been properly compiled based on the assumptions made by the State Executive Council and are presented on a basis consistent with the accounting policies normally adopted by the state government."
The five year financial projections, which was made for the purpose of the Offer for Subscription of N4.0 billion First Cross River State Floating Rate Redeemable Bond 2004/2007, revealed that "the Executive Council of Cross River State is of the opinion that subject to unforeseen circumstances, the state's revenue and expenditure for each of the five years ending December 31, 2007 will approximate the figures in the Offer prospectus."
Because, Cross River State preferred tourism destination in Nigeria, it will continue to capitalise on the opportunities provided by tourism through the strategic and planned marketing of extraordinary tourism assets such as the Ikom Monoliths, the Kwa and Agbokim Waterfalls, the Old Slave Route and Ranch Resort.
The State Government said that complimentary facilities are to be found in Calabar such as the Calabar Golf Course, the Drill Ranch and Cercopan Sanctuary, Mary Slessor's Residence and Grave, the Cultural Centre and the Calabar Stadium, all that add further value to the tourism product of the region.
The Government further revealed that its priority for tourism in Cross River State is evident through its full support of the Tinapa project and its recent commissioning of a Tourism Development Framework for the State.
"This framework will fulfill delivery through a formal tourism bureau and marketing authority focused on promoting the tourism product of the region. Such carefully orchestrated strategic actions, in combination with the development of Tinapa, will serve as the catalysts for future tourism growth and development in Cross River State and Nigeria as a whole," said the government.
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