Nairametrics| Ever since the Etisalat $1.2 billion debt unraveled a couple of weeks ago, we have now had about three commercial banks come out clean to reveal their own portion of the syndicated loan. Access Bank was first out with N40 billion, GTB then followed with N42 billion and then Fidelity with N17.5 billion. We still expect to hear from about 10 more banks. But banks are not the only ones exposed to Etisalat. Telecom firms are too and a notable one is IHS.

A pictorial representation of IHS Sale and Lease Back model

IHS got embroiled in this web of debt for two main reasons. Firstly, it purchased Etisalat’s cell sites under a sale and lease back agreement. The deal will see Etisalat selling its tower assets to IHS, while leasing it back in exchange for lease rentals. Secondly, it also has a $800m bond which is partly securitized from the cash flows of the Etisalat lease. However, Reuters reported last week that Etisalat was over due on payments by 6 months suggesting that things could get riskier for Bond holders should things go from bad to worse for Etisalat. IHS has now issued a press release explaining its on side of the story.

Here is a rundown;

  • Etisalat and IHS have what is called a “Masters Lease Agreement”. This is basically a lease that agreement that allows IHS lease its tower assets to Etisalat in exchange for lease rentals.
  • IHS revealed it has experienced volatility “in terms of timing of settlement of invoices with certain customers.” We believe this includes Etisalat.
  •  As of 31 December 2016, US$8.5 million was more than 120 days overdue from Etisalat to IHS Holdco. That is, Etisalat was overdue payment to IHS by about two 4 months.
  • IHS Holdco says the amount represents less than 2.5% of the expected proforma full year combined revenue of the Group for 2016. This suggest, IHS Holco has an annual revenue of about $100 million annually.
  • IHS again issued another press release on March 10 explaining that “approximately US$2.4 million (based on an exchange rate of US$1: N305) was more than 120 days overdue from Etisalat to the FinCo Group. This amount represents approximately 3.7% of the expected full year revenue of the FinCo Group for 2016.”
  • This suggest, the $8.5 million was owed to the Holdco Group out of which $2.4 million was owed to the FinCO Group (Nigerian entity).
  • Fitch rating agency also believes IHS faces limited risks to its operations in Nigeria following recent press reports that Etisalat Nigeria. It explained that it had already taken cognizance of the risk and assigned a rating of B+/Negative to IHS debt


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