By OLUSHOLA BELLO,
Capital market stakeholders have said Etisalat Nigeria debt crisis could threaten the affected banks’ profitability and dividend payout to shareholders in 2017 if not properly addressed.
In 2013, Etisalat Nigeria secured a seven year $1.2 billion syndicated facility from 13 Nigerian banks including Access Bank, Zenith Bank, Guaranty Trust Bank, First Bank, Fidelity Bank, First City Monument Bank (FCMB), Stanbic IBTC, Ecobank, United Bank for Africa (UBA) and Union Bank of Nigeria to refinance existing obligations in which most part of the remaining fund was used to finance network expansion.
Etisalat Nigeria began to experience cash flow problems following the steep depreciation of the naira and the impact on its foreign currency denominated exposure. The telecoms provider also has some inputs denominated in dollars resulting in bloated expenses.
LEADERSHIP learnt that the company which had been in and out of meeting rooms with its bankers to resolve issues around the debt where various options have been considered. While Etisalat Nigeria was requesting for another loan restructuring, the banks were requesting that Etisalat Nigeria convert an existing shareholders loan to equity and inject more equity into the business in order to reduce the company’s leverage before another restructuring can be done.
Analysts noted that following the failure to resolve the matter amicably after several meetings that involved the Central Bank of Nigeria (CBN) and the National Communications Commission (NCC), bid to restructure the loan is as good as bad and doubtful.
They noted that the banks must therefore provide for the loan, with unpleasant implications for their books at the end of 2017 financials, following which they are required to make provisions, thereby wiping out their profit. This would further affect the ability of the banks to pay dividend to their shareholders.
They further noted that lenders involved in the deal are those who have consistently paid dividend to shareholders and who may be forced to break their tradition.
A report published by an independent investment banking services specialist firm, Exotix Capital Limited, showed that Zenith Bank accounted for about N80 billion of the total loan, which is the largest among the top eight banks that participated in the loan syndication.
An official of Exotic Partners, a subsidiary of Exotix Capital Limited, Jumai Mohammed, said about N42 billion contributed by Guaranty Trust Bank, GTB, constitutes about 2.6 per cent of its total loan book value, while about N40 billion by Access Bank accounts for about 2.2 per cent of the bank’s total loan exposure.
Further details of the report showed that United Bank for Africa, UBA’s contribution of N37 billion represents about 2.5 per cent of its loan book value, while First Bank’s N24billion takes about 1.2 per cent; Fidelity Bank (N17.5 billion) 2.4 per cent; Stanbic IBTC (N7.3 billion) 2.1 per cent, and First City Monument Bank, FCMB (N4.5 billion), 0.7 per cent.
Although the report estimated a modest impact of the loan on the affected banks, saying at a headline level, the facility to Etisalat Nigeria represented only 1.9 per cent of the aggregate bank loans in the country.
Also, a sensitivity analysis of the loan showed that the facility on the average would register a -12 per cent on net profit, -2 per cent on equity and -0.3 basis points on the capital adequacy ratios in the 2017 financial year of the banks.
“We believe the banks should easily be able to absorb a shock of this magnitude. If this development is precursor to more general difficulties in the FCY loan exposure, which represents on average 47 per cent of the total loan book, then we may see more pronounced deterioration in the equity base of banks. Within our coverage, Diamond Bank is likely to be most impacted, while Wema Bank should be least impacted,” the report said.