Banks shun Etisalat loan restructuring talks to avoid provisions

Indications are that talks between Etisalat Nigeria and a consortium of banks that syndicated a $1.2 billion facility for to restructure payments of the loan have reached deadlock. Etisalat had failed to make payment of the due loans in February.

Banks which are at the moment facing rising non performing loans are under pressure to avoid loan-loss provisions, are said to be pushing to finalise the debt restructuring before the 2017 half-yearly audit. Etisalat met with the creditors in London on April 28 led by Guaranty Trust Bank but they could not agree on a way forward, the sources said.
The telecom firm signed the medium-term seven-year facility with 13 local banks in 2013 to refinance a $650 million loan and fund expansion of its network, but is now struggling to repay as a result of the devaluation of the Naira.

According to Reuters report Etisalat Nigeria said that it was in talks with banks to restructure the loan after it missed a payment.
“There is no conclusive view on the way forward,” one banker who declined to be named told Reuters after the meeting. “The most viable solution which the banks are pushing for is for the shareholders to inject equity into the business.”
A source at Etisalat, which owns 45 percent of the Nigerian company, said the company was not willing to invest more after converting some loans it made to the affiliate to equity and writing down its investment to $50 million.

Abu Dhabi’s state-owned fund Mubadala owns another 40 percent.
Etisalat is the biggest foreign-owned victim of the dollar shortages plaguing Nigeria’s financial system.
Nigerian regulators in March agreed with local banks to pursue a default deal rather than a receivership for Etisalat Nigeria so as not to deter investors and to avoid a wider debt crisis.
But banks are keen to keep a lid on rising non-performing loans (NPLs) to preserve their capital. NPLs hit 14 per cent in 2016 from 5.3 per cent a year earlier.

Etisalat has 20 million subscribers, making it Nigeria’s number four mobile operator with 14 per cent market share. South Africa’s MTN has 47 percent, Globacom 20 percent and Airtel – a subsidiary of India’s Bharti Airtel – 19 per cent.