The consortium of banks to which Etisalat Nigeria owes =N=541 billion appear not to be interested in taking over the ownership of the telecoms company.
Bloomberg had reported on June 20, 2017 that Etisalat Group, the parent company of Etisalat Nigeria announced a filing to Abu Dhabi Securities Exchange in Abu Dhabi, UAE of its intention to pull out of their operations in Nigeria without meeting their obligations, prompting all sorts of speculations.
Banking industry sources said that the action of the Etisalat Group amounts to abandoning the company’s monumental obligations in Nigeria, which includes N541 billion syndicated and bilateral loans approved by 13 Nigerian banks but which is now delinquent.
The banks are also unhappy at the Group’s action, which they feel amounts to deliberate attempt to evade paying taxes and levies due to the federal government and regulatory agencies as well as other payments to third party creditors, including vendors, service providers and contractors, which is tantamount to ignoring and disregarding the commercial contracts of Nigeria.
Some media reports had indicated that the consortium led by Access Bank had moved to take over the telecoms firm, following the collapse of Emerging Markets Telecommunications Services, EMTS, promoted by-one time chairman, United Bank for Africa, UBA, Hakeem Bello-Osagie, to reschedule the $1.72 billion debt.
Sources from the banks also confirmed that the consortium of banks have no intention of taking over ownership of Etisalat Nigeria.
The sources confirmed that “the consortium of banks have not been involved in the ownership of Etisalat Nigeria and therefore is in no position to transfer or retain any percentage of Etisalat Nigeria shares”.
Reports further revealed that the facilities approved by the banks for Etisalat Nigeria fell due for payment and the company has serially defaulted on repayment.
Part of the facilities have become delinquent, while the sponsors and management of Etisalat Nigeria were not forthcoming with the various restructuring options proposed by the lenders
“Part of the facilities have become delinquent, while the sponsors and management of Etisalat Nigeria were not forthcoming with the various restructuring options proposed by the lenders”, one source with knowledge of all the discussions said.
The source who pleaded anonimity, confirmed that the consortium of banks has not been involved in the ownership of Etisalat Nigeria and therefore was not in a position to transfer or retain any percentage of Etisalat Nigeria shares.
Emerging facts revealed that while other operators sold their towers and utilized the entire sales proceeds to repay their loans, Etisalat Nigeria in 2014 sold its towers and did not apply the sales proceeds to repay its loan.
The telecoms firm had been under pressure to repay the loan in the wake of the dropping value of the Naira but has so far failed to either reach any agreement with the consortium or attract fresh capital injection from its parent company, the Etisalat Group.
Meanwhile, the Nigerian Communications Commission (NCC) has moved in swiftly to avert the hostile takeover of the Emerging Markets Telecommunications Services Limited trading as Etisalat Nigeria by a consortium of banks over the $1.2 billion bank debt owed them by the telecoms service provider.
There is a documentary proof which showed that the Nigerian telecommunication regulator was seriously concerned about the implications the takeover of the network would have on Etisalat Nigeria’s 19.5 million active subscribers and the telecommunications industry at large.
The document entitled ‘Indebtedness of Etisalat To a Consortium of Banks’ signed by the executive vice chairman of NCC, Professor Umar Danbatta, dated June 21, 2017 was addressed to the managing director, Access Bank Plc and copied to the Governor of the Central Bank of Nigeria and managing directors of Guaranty Trust Bank, Zenith Bank and United Bank of Nigeria.
In the said letter, Danbatta said while the NCC recognizes the rights of the banks to foreclose on the debt, it is expedient to draw their attention to certain salient issues on the Nigeria Communications Act 2003, S38 which provides that in section 38 (1) that “the grant of a license shall be personal to a licensee and the license shall not be operated by, assigned or sub licenced or transferred to any other party unless the prior written approval of the Commission has been granted”.
He said section 38 (2) provides that “a licensee shall at all time comply with the terms and conditions of the licence and the provision of this Act and its subsidiary legislation”.
He added that condition 12 of the Unified Access Service Licence (UASL) issued to EMTS also mirrors the provisions of the NCA 2003 which is reproduced above.”
According to Danbatta, “condition 15 of the license provides that EMTS shall notify and obtain the prior approval of the commission in respect of any change in the control of the shares in the license and such notification shall be given as soon as practicable prior to the proposed change in structure”.
He further said, “In view of the foregoing it is imperative that there is a meeting between the consortium of banks and the Commission to discuss these issues.
“Consequently, we request that you revert to us on this matter in order for us to convene a meeting of all concerned in this matter in the shortest possible time as time is of essence”.
Meanwhile, Etisalat Nigeria has debunked reports in the media (Not LEADERSHIP) that it is being investigated by the Economic and Financial Crimes Commission (EFCC), following a petition to the federal government asking that Etisalat be investigated on how the funds from the syndicated loans were utilized.
Ibrahim Dikko, vice president, regulatory and corporate affairs of the company said, “Etisalat wishes to categorically affirm for the avoidance of doubt that the reports are patently false and most unfortunate considering the damage such misleading information can have not only on our business, but indeed on the telecommunications industry and the country as a whole.
“A simple interrogation of the rigorous process for securing a syndicated loan from a consortium of reputable banks would have exposed the truth to the original writer of this story and other media channels who have subsequently re-circulated the falsehood without interrogation or verification. Concerned parties have access to our books and do not require an investigation into how the loan sum was utilized.
“All of the infrastructure investment and services for which the loan was secured, were paid through our banks and these are verifiable. It is indeed crucial for the media to correctly inform the general public by providing the needful macro-economic context around which the challenges we encountered with meeting up with the loan obligation occurred.
“It would be recalled that the $1.2bn loan, a medium-term seven-year facility, was obtained by Etisalat Nigeria for the purpose of expanding its network and improving the quality of service on its network. The economic downturn of 2015 and sharp devaluations of the naira negatively impacted on the dollar-denominated loan by driving up the loan value, thus prompting Etisalat to request a loan restructuring from the consortium of banks”.
He said contrary to the widely reported misrepresentations about Etisalat Nigeria’s debt obligation to the consortium of 13 banks, it has become pertinent to set the records straight.
He continued: “Prior to this time, Etisalat had in fact consistently and conscientiously met up with its payment obligations. As at today, we can categorically state that the outstanding loan sum to the consortium stands at $227 million and N113 billion, a total of about $574 million if the naira portion is converted to US dollars.
“This in essence means almost half of the original loan of $1.2 billion, has been repaid. Etisalat continued to service the loan up until February 2017, when discussions with the banks regarding the repayment restructuring commenced. We hereby appeal to our media partners to continue to uphold the ethics of the profession by exercising some restraint particularly in the publication of such misleading and damaging information”.
In a related development, Exotix Capital, a leading frontier and emerging markets investment firm based in the United Kingdom, has said the impact of the medium-term seven-year facility secured by Etisalat Nigeria from the consortium of 13 banks is manageable.
The firm in a research report entitled, ‘Nigeria Banks’, released yesterday said the impact of the $1.2 billion syndicate loan out of which about 42 per cent ($504m) has been repaid was “modest”.
Head of equities financials research, Rahul Shah and equity research analyst, Jumai Mohammed, said “We estimate a modest impact on banks. At a headline level, loans to Etisalat Nigeria represent 1.9 per cent of aggregate bank loans.
“Likewise on our sensitivity analysis, the Etisalat loans would on average have a -12 per cent, -2 per cent and -0.3bp impact on our FY17 net profit, equity and capital adequacy ratios for the banks, respectively. We believe the banks should easily be able to absorb a shock of this magnitude”.
The report ruled out any likely bailout by the Asset Management Corporation of Nigeria (AMCON) citing the current weak financial state of the corporation, but said however that the recent Central Bank of Nigeria’s (CBN) directive to the lenders to halt further action on the debt could provide some short term respite.
“Is a CBN bailout likely? Given the weak state of AMCON finances, we think this is unlikely. However, CBN recently directed exposed banks to halt further action on the debt, meaning some form of bridge funding could be under consideration to cover the period until a new buyer steps in”, they noted.
On the possible options which the banks could explore to recoup the outstanding sum from Etisalat Nigeria, the report maintained that parties could come to favourable terms for loan restructuring.
They noted: “However, in the event that these banks aren’t able to restructure the loans at favourable terms with the company, then one of two things will have to happen: The banks swap their loans to equity, recognising the loans as investments.
“We don’t expect banks to have the capacity to take on such investments or be a willing party to a loss-making underlying asset. The banks restructure the loan, although in the near term they will be required to make provisions on the loan, until they find a buyer. We believe the second scenario is more likely, but the banks could possibly resolve with a new buyer before the end of the year”.
