Restructuring a Municipal Bond

The crash of crude oil price and resultant decline in oil revenue to the Federal Government of Nigeria ultimately led to a recession in the economic and significant reduction in Statutory Allocations paid to State and Local Governments. Most states keenly depend on Federal Allocations and the lack of adequate Internally Generated Revenue has left most States in the Federation in dire need for funds to embark on socio economic projects which enhance the standard of living of its citizenry as well as fund recurrent expenses.

In addition, typically, Bonds issued by a State Government in Nigeria are serviced from a first line charge on such State’s Statutory Allocation from the Federal Government, irrespective of the reduction in allocations to that State, based on Irrevocable Standing Payment Order (ISPO) for debt servicing obligations as would have been initially approved.

One of the State Governments was in this financial straits – reduced Federal Allocation, huge debt servicing obligations, low Internally Generated Revenue (IGR) and need to continue to operate and invest in developmental project. Eczellon was appointed as Financial Adviser and joint issuing house on the restructuring of its fixed rate 7 year bond to reduce the constraints on the State’s finances.


Some of the major challenges faced during the execution of the project include:

  • Previous Restructurings on the Bond

There had been a previous restructuring of the bond. Further restructuring of the bond was expected to affect investor’s sentiments on the bond, considering impact of restructuring on predictable cash flow expectation.

  • Prevailing Economic Circumstances

The restructuring exercise was to be executed when the country was in recession – a period of expected negative sentiments from investors to such proposition (restructuring of a fixed income instrument) at a time of uncertainty on portfolio yield

  • Regulatory Approval

The restructuring exercise required the approval of the Securities & Exchange Commission (SEC) which was expected to keenly scrutinize the proposed restructuring exercise.

Solution - Our Approach

Eczellon prosecuted the restructuring exercise with full consideration and active engagement of Bondholders. Active stakeholders alignment workshops and investor forum were conducted for effective market sounding. The new terms of the bond, post restructuring, was tailored to investor sentiments including compensating the bondholders for the change in cashflow pattern, improving yield over time, while the State’s liquidity was significantly improved.


The restructuring exercise was successful and completed in record time. The tenor of the Bonds was extended and thereby reduced the State’s monthly debt servicing requirement by up to 75%. The resultant boost in liquidity enabled the State to fund other socio economic projects which will benefit its citizens.

Eczellon delivered a quick and most efficient bond restructuring exercise. Investor engagement and regulatory filing were exceptional and our cashflow management objectives were achieved in double quick time

Tam Alazigha
Bayelsa State Government
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