Three banks take over Etisalat over N541 billion debt

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Inside Etisalat lagos head office building
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Reports by Vanguard and other online sources indicate that three Nigerian banks and their foreign affiliates, yesterday, took over Etisalat Nigeria for allegedly failing to repay a loan of over $1 billion (N541 billion) it secured from the consortium of three Nigerian banks and foreign affiliates in 2015.

The Nigerian banks are Guaranty Trust Bank, Access Bank and Zenith Bank. The new development is coming after the telecom regulator, the Nigerian Communications Commission, NCC, tried a couple of times to mediate issues between the telecoms company and her creditor banks without results.

A source at NCC confided in the Vanguard that the commission tried its best to ensure the situation didn’t degenerate to taking over of the telecoms company but that pressures from the banks became so intense it had to allow the action.

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The source said the issue had lingered for a while, with the NCC believing it could provide some middle ground for both parties to come to a truce but unfortunately the banks feared that inability to recover the loan could expose them to the Asset Management Company of Nigeria, AMCON, which had been demanding immediate cut-down on the rate of their non-performing loans.

The loan facility totalling $1.72 billion (about N541.8 billion) involving a foreign-backed guaranty bond, was for Etisalat to turn around its network and expand its operations in Nigeria.

However, the banks claimed that Etisalat had failed to service the debt as agreed since 2016. They subsequently reported Etisalat to the banking sector regulator, the Central Bank of Nigeria, CBN, and its communications sector counterpart, the NCC.

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Our NCC source disclosed that Etisalat blamed its inability to fulfil its obligation to the banks on the current economic recession in Nigeria. All attempts to get Etisalat to confirm the story proved abortive after several calls and text messages to relevant officials of the company.

However, reports are that Etisalat Nigeria is in talks with the local banks to renegotiate terms of the $1.2 billion loan it took four years ago to expand its network in the country after missed payments.

Though the banks are under pressure to recover their money, Vanguard learned that loan restructuring is being re-negotiated as there was still a considerable gap between what Etisalat offered as new payment terms and what the banks want.

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A source in one of the affected banks told Vanguard that the banks could not afford a long-stretched re-payment plan in 2017 as the loan had been restructured twice since 2015. The banks are also said to be under pressure due to similar restructuring burden imposed on them by loan failures in the oil and gas sector, as well as general commerce.

The bank source said they were most unhappy with Etisalat because the telecom giant could not present an independently verifiable proof that their volume of business went down by the magnitude that could put significant loan repayments in jeopardy.

Foreign shareholder, Emirates Telecommunications, EMT Group trading as Etisalat, own a 40 per cent stake in its Nigerian affiliate, which accounts for about 3.7 percent of the group’s revenue in 2013. Ibrahim Dikko, Vice President for Regulatory Affairs at Etisalat Nigeria, said Etisalat missed payments due to an economic downturn in Nigeria, currency devaluation and dollar shortages on the country’s interbank market.
“We are in discussions with our bankers and have been for quite a while. They have not taken over the business and we are hoping that we can resolve the issue and find a way to renegotiate terms,” Dikko said.

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Etisalat Nigeria signed a $1.2 billion medium-term facility with 13 Nigerian banks in 2013, which it used to refinance an existing $650 million loan and fund a modernisation of its network. Dikko said the business performed well, last year, and was still in profit at the level of EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), while loan repayments had been up to date “until recently.”

He said the company was now looking at “all the options”, which could include converting the loan into Naira, but did not want to anticipate the outcome of talks with the lenders. Several other firms took out dollar loans in 2013 to expand at a time Nigeria was seen as an attractive investment prospect. The economy was growing at seven per cent, with a stable currency and rising oil prices. But now, the country has been running short of dollars as oil revenues have fallen along with the price of crude, pushing the economy into its first recession in a quarter of a century. That has weakened the Naira, which trades at a lower level in the black market than the official interbank rate against the dollar.
The dollar shortages have made it difficult for local companies to get access to foreign currency and as a result, some have struggled to repay dollar-denominated debts with several lenders having restructured loans to oil firms.

Etisalat is Nigeria’s fourth largest telecoms operator, with about 21 million subscribers as at January, 2017, according to the NCC.

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The company commenced business operations in Nigeria in 2009.

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