DEUTSCHE BANK TERMINATES GDR DEAL WITH FBN HOLDINGS

From December 28 2016 the agreement that allows Deutsche Bank to act as depository for the sale of FBN Holdings PLC ( hitherto known as First Bank of Nigeria PLC) shares abroad, will cease to exist.

According to FBN Holdings PLC company secretary, Tijani Borodo esq, in a notice to the Nigerian stock exchange, the global depository receipt (GDR) is being terminated at the instance of Deutsche Bank through relevant notice to that effect.

The agreement was between Deutsche Bank Trust Company Americas and FBN Holdings PLC.

From that date, added Borodo "if any GDRs are outstanding after the termination date, Deutsche Bank shall, as soon as reasonably practicable, sell the underlying ordinary shares and deliver the net proceeds of such sale to holders of GDR.. not previously surrendered".

GDRs are international certificates issued by international banks acting as depository banks for the purchase of shares of foreign companies.

It allows such shares to be traded locally as in through the Nigerian stock exchange and also offered for sale through branches of depository banks abroad.

Most times it involves various layers of prior approval including that of board of directors, regulatory authorities and financial institutions.

Amongst the initial agreements needed are for subscription, depository, agency and deed of sale.

For companies offering shares for sale, GDRs help ginger foreign investors interest and make it easier to raise needed capital abroad.

For the investor, it allows for better diversification of portfolio and makes for prompt payment of dividends once declared.

However, when operating currency is down, as is the case with Naira right now, it becomes less attractive because of income value depreciation and sometimes, added difficulty in remitting dividends.

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