FBN Holdings Terminates Its Global Depository Receipt Programme

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FBN Holdings PLC, the largest financial services group in Nigeria and West Africa has announced the cessation od its global depository receipt programme, GDR.

The group announced that ‘GDR programme will be terminated on 28 December 2016. Deutsche Bank Trust Company Americas, in its capacity as the Depositary, has sent a notice to the clearing systems to notify the termination date of 28 December 2016’.

As regards all outstanding GDR, the group said ‘If any GDRs are outstanding after the termination date, Deutsche shall, as soon as reasonably practicable, sell the underlying ordinary shares and deliver the net proceeds of such sale to Holders of GDRs which have not previously been surrendered’.

According to Investopedia, a global depositary receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares but are offered for sale globally through the various bank branches. A GDR is a financial instrument used by private markets to raise capital denominated in either U.S. dollars or euros.

Companies issue GDRs to attract interest by foreign investors, providing a lower-cost mechanism in which these investors can participate. These shares are traded as though they are domestic shares, but they can be purchased in an international marketplace. Often, the actual shares that are allocated within the GDR are put in the possession of a custodian bank as transactions are processed, ensuring both parties a level of protection while facilitating participation.

The purchase and sale of GDRs are managed through brokers representing the buyer, generally from the home country, and seller within the foreign market. The actual purchase of the assets are multi-staged, involving a broker in the investor’s home, a broker located within the market associated with the company that has issued the shares, a bank representing the buyer and the custodian bank.

If an investor desires, GDRs can be sold through their brokers as well. They can be sold as is on the proper exchanges, or they can be converted into regular stock for the company. Additionally, they can be canceled and returned to the issuing company.