Aso Savings, Stanbic IBTC Secure 60% of NMRC Series 1 Refinancing

Stanbic IBTC and Aso Savings and Loans will rake in N6.2 billion from the proceeds of the N10bn Series 1 bond issue that the Nigerian Mortgage Refinance Company (NMRC) is in the market to raise.

This sum, which accounts for more than 60 percent of the net proceeds of the bond sale is due to the fact that mortgages created between the two banks account for more than half of the eligible mortgages created in the country, in terms of both number and monetary value, which the NMRC will refinance.

In all, 577 mortgages originated by banks met the requirements of the NMRC’s Uniform Underwriting Standards and were included in the provisional Series 1 Mortgage portfolio as at May 28. They will be eligible for refinancing in this first tranche.

This bond raising exercise follows the adoption of legacy loans – that is, existing mortgages in the market before the initiation of the scheme, into the Uniform Underwriting Standards.

“We started by looking at the legacy loans – existing mortgages in the economy… and bring them into conformity with what we now call the Uniform Underwriting Standards. We have done that and it drives our first process of the mortgage refinance”, Charles Inyangete, CEO of the NMRC said in an earlier interview.

According to the preliminary prospectus known as a Red Herring Pricing Supplement, which was sent to Qualified Institutional Investors (QIIs), High Net worth Individuals (HNIs) and filed with the SEC, “none of the Series 1 Mortgage Loans in the portfolio is delinquent or non-performing”.

The Series 1 bond issue is the first part of a larger N140bn Medium Term Note programme.

Of the 577 mortgages to be refinanced by the NMRC, Aso Savings originated the most, accounting for up to 201 mortgages (35 percent of mortgage portfolio), with an outstanding loan balance valued at N2.5bn or 27 percent of the Series 1 mortgage pool, and as a result,will receive 27 percent of the
Series 1 refinancing value.

Stanbic IBTC originated the second largest number of mortgages, 132, but with a higher nominal value of about N3.7 billion. In return, Stanbic IBTC will receive 39 percent of the refinancing value.

Other banks include Imperial Homes Mortgage Bank with 66 mortgages or 14.9 percent of mortgage pool value and will receive N1.39 billion of refinancing.

Access Bank, which originated 15 mortgages or 2.5 percent of the mortgage pool will be refinanced with N238m, Abbey Mortgage Bank with 19 mortgages, accounts for 2.6 percent or N245m of the refinancing value, FHA Mortgage Bank accounts for 2.2 percent or N203 million.

Others are Resort Savings and Loans 5.3 percent, Suntrust Savings and Loans 5.3 percent, and Trustbond Mortgage Bank at 3.5 percent.

In all, only nine banks will be refinanced.

The coupon rate of the NMRC bond is not yet known, but according the Red Herring, the interest rate on the bonds will be a fixed basis point above the interpolated 15 year Benchmark Rate, as derived from the prevailing rates on 10 year and 20 year FGN Bonds on the date of commencement of the Book Building process.

Analysts think that the coupon rate will range between 0.25 percent and 0.50 percent above the benchmarked rate, which is estimated to be around 13 percent.

The mortgages however, which is the underlying asset, yields an average of 18 percent. “Our bond issue will allow us to raise funds with the government guarantee which allows us to come in at a cheaper rate than otherwise. If the government is borrowing at double-digits, it means that [our] cheaper rate will be at about the same rate that the government is borrowing”, Inyangete said.

The Red Herring, though containing most of the information pertaining to the bond issue, is still considered incomplete and subject to change .