Etisalat crisis worsens Zenith Bank, GTB, others’ debt exposure – Report

Zenith Bank’s exposure in the $1.2 billion (about N377.4 billion) syndicated loan granted Etisalat Nigeria by a consortium of 13 Nigerian banks accounts for about 3.5 per cent of its total loan book, a sensitivity analysis report on the impact of the loan on the Nigerian economy has shown.

The report published Thursday 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, Ms. Mohammed said 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,” Ms. Mohammed said.

“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.

Out of the total loan package, about $600 million (about N115billion) was secured by assets by the company, which also pledged shares of the parent company, Etisalat Group of UAE to the tune of $235million.

Etisalat Nigeria Vice President, Regulatory & Corporate Affairs, Ibrahim Dikko, said on Thursday, the company had “consistently and conscientiously” repaid about 42 per cent (about N504 million) of the original loan package.

“As at today, we can categorically state that the outstanding loan sum to the consortium stands at $227million and N113billion, a total of about $574million (if the Naira portion is converted to U.S. Dollars,” Mr. Dikko said.

With last Tuesday’s commencement of enforcement of the June 9 Default & Security Enforcement Notice, Emirates Telecommunications Group Company (Etisalat Group) has since announced its decision to quit the company.

In a filing with the Abu Dhabi Securities Exchange in Abu Dhabi, the UAE group requested Emerging Markets Telecommunications Services, EMTS Holding BV, a special purpose vehicle established in Netherlands, to transfer the entire 70 per cent of its shareholding in Etisalat Nigeria to United Capital Trustees Limited, the legal trustees of the banks effective June 15, 2017.

But, with the warning by the telecoms sector regulatory authority, the Nigerian Communications Commission, NCC, that the law forbids Etisalat Nigeria from transferring the operational license to a third party without written permission, the report said the banks were weighing available options open to them to move the process forward.

Although Globacom was said to have indicated interest to take over in the past, current reality, relating to the unresolved debt crisis, may have persuaded the company to abandon the idea.

Consequently, PREMIUM TIMES learnt Etisalat Nigeria was holding talks with a group of private equity investors to raise funds defray the loans.

Where the discussion fail to yield positive fruits, a source familiar with the transaction hinted the Central Bank of Nigeria, CBN, which said to be very concerned about the impact of the crisis on the country’s unemployment situation, may be willing to come forward with a bailout.

Given the weak state of Asset Management Corporation of Nigeria, AMCON, finances, the source, who requested that his name should not be revealed, as he was not authorized to speak on the issue, said he was not optimistic of the apex bank’s intervention.

But, Ms. Mohammed said the recent directive by the CBN to exposed banks to halt further action on the debt matter, there was an indication that some form of bridge funding could be under consideration to cover the period until a new investor emerges.

In 2013, Etisalat had obtained the syndicated loan from a consortium of 13 Nigerian banks, including Access Bank, Zenith Bank Plc, Guaranty Trust Bank Plc, First Bank Limited, Fidelity Bank Plc, First City Monument Bank (FCMB), Stanbic IBTC, Ecobank, United Bank for Africa (UBA) Plc and Union Bank of Nigeria Plc.

The loan, which involved a foreign-backed guaranteed bond, was to help the tele-mobile firm finance a major network rehabilitation, upgrade and expansion of its operational base in Nigeria.

However, its alleged failure to meet agreed debt servicing obligations with the banks since 2016 triggered a major crisis, culminating in the withdrawal of its major shareholder, Emirates Telecommunications Group Company from the company last week.

Etisalat Nigeria is currently left in the hands of EMTS promoted by the former Chairman of United Bank for Africa (UBA), Hakeem Bello-Osagie.