(Adds pricing analysis)
By Sudip Roy
LONDON, Feb 15 (IFR) - Nigeria is offering plenty of value for a dual-tranche US dollar transaction that it began marketing on Thursday morning.
While leads put the pick up to fair value at 40bp-45bp at the initial pricing stage on both tranches, bankers away and investors think the premium is much bigger than that.
Uday Patnaik, head of emerging market debt at LGIM, said the 12-year bond is roughly 50bp cheap to the curve, while the 20-year tranche is 60bp cheap. However, he said that both notes will be tightened before final pricing.
A banker away from the deal reckoned that the premium was about 55bp on the 12-year and 75bp on the 20-year.
The African sovereign has opened books on a benchmark sized February 2030 bond at Treasuries plus 450bp area and a benchmark February 2038 note at plus 487.5bp area.
Those spreads are equivalent to roughly 444bp over mid-swaps on the 12-year bond and plus 500bp on the 20-year tranche.
The banker away from the deal spotted Nigeria’s November 2027s at a Z-spread of 358bp pre-announcement, its February 2032s at plus 432bp, and its February 2047s at plus 447bp.
He said that following the deal’s announcement the 2027s and 2047s had widened considerably by nearly 30bp.
Thomson Reuters data shows that at Wednesday’s close the 2027s were trading at a Z-spread of 375bp, the 2032s at 424bp and the 2047s at 470bp.
That would make the premium on the 12-year bond at about 45bp and on the 20-year tranche at 60bp.
Nigeria’s bonds have widened significantly since the beginning of the month largely due to the broader financial markets sell-off. The 2027s, for example, were trading at a Z-spread of 322bp on February 1.
The 144A/Reg S deal is today’s business via Citigroup (B&D) and Standard Chartered. Expected issue ratings are B2 by Moody‘s, B by S&P and B+ by Fitch. (Reporting by Sudip Roy, editing by Helene Durand)