Nigeria’s Oil and Gas giant, Oando has announced that it has secured a N94.6 billion ($475 mln) restructuring loan facility from 10 domestic banks as part of its plans to restructure its finances and return to profitability this year. This is a huge deal for a company that reported losses of over N180 billion in 2014 and another N45.6 billion in the first 9 months of 2015.
The banks that have decided to take another huge bet on Oando are as follows; Access Bank, Diamond Bank, Ecobank, FCMB, Fidelity Bank, Stanbic IBTC Bank, UBA , Union Bank and Zenith Bank.
The facility is said to be a five-year term loan, paying Nigerian interbank rate plus 2 percentage points with a three-year moratorium on principal. This basically means Oando will not be paying principal for three years and will only service interests.
Here is the press release issued by the bank
Lagos, Nigeria – Oando PLC (referred to as “Oando” or the “Group”), Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg Stock Exchange, today announces the conclusion of a N94.6 Billion facility provided by ten leading financial institutions in Nigeria. The financing, coordinated by the mandated Lead Arranger, Access Bank Plc, is a 5 year Medium Term Note (MTN) at Nibor + 200 bps as a crucial part of our strategic restructuring plans.
Commenting on the transaction, Mr. Wale Tinubu, Group Chief Executive, Oando PLC, said “In a bid to return to profitability in 2016, I am happy to announce the successful completion of restructuring our overall debt profile into a N94.6 BillionMedium Term, 5 year consolidated facility, with a 3 year moratorium on principal. This is the pivotal leg in our Group restructuring plan of Growth; via the Upstream business, Deleverage; via the disposal of $350 million in assets’ value in 2016 and our return to Profitability in 2016, driven by our dollar earning oil export & trading activities. The company now stands diversified with higher weighted dollar denominated earnings, an optimised and restructured balance sheet with lower cost of capital and longer tenors. With the upturn in the global oil prices to levels above $50 per barrel, we now look forward to the successes of 2016, having ridden out the storm”.
The institutions involved in the financing are; Access Bank, Diamond Bank, Ecobank, FCMB, Fidelity Bank, Keystone Bank, Stanbic IBTC Bank, UBA Bank, Union Bank and Zenith Bank. The transaction further signifies the solid commitment from Nigerian banking institutions to support sustained growth and development of the Nigerian oil and gas sector in these trying times. Oando PLC will continue to exercise strong financial discipline in meeting obligations and our debt covenants.
Oando as at its 2015 9 Months results revealed that it had about N241 billion in external loans and also had a negative retained earnings of over N200 billion. This deal basically provides a lifeline not just for Oando but for Commercial banks who by restructuring the loans may not have a chance to write back some of the impairments losses they had taken on the bank’s debt. The loan on paper basically provides Oando with a cashflow lifeline which it badly needs amidst the fall in oil prices. By not paying principal the bank for three years, the company saves enough cash flow which it needs to save solvent. However, the bet is that Oando will be able to raise significant capital within the next three years to start to pay down on the principal by the fourth year.
Analysts who are not sympathetic to Oando will probably view this as another way of kicking the can down the road as this is not the first time that Oando will be receiving a lifeline.