Nairametrics|Talks between telecoms operator Etisalat and the consortium of Nigerian banks has ended in a deadlock. Etisalat held the meeting with a consortium of Nigerian banks in the United Kingdom.
Here is what we know so far;
- Etisalat Nigeria is owing the banks $1.2 billion.
- Etisalat took the loan to refinance an already existing loan and fund expansion of its network. To avoid a banking sector turmoil and a breakdown in investor confidence, the CBN decided to intervene, choosing a debt restructuring over a receivership.
- A tripartite meeting between the CBN, Consortium of banks and Etisalat was immediately setup culminating in this meeting in the UK.
Update from the meeting in the UK
- Etisalat missed payments leading to a meeting between the consortium of banks and Etisalat.
- Reuters reported that Etisalat met with the lenders in London on April 28, in a meeting led by Guaranty Trust Bank
- Banks insist that their preferred option is for Etisalat to get their parent company to inject equity into their Nigerian subsidiary.
- Etisalat Abu Dhabi, which owns 45% in their Nigerian subsidiary, is adamant to inject any more capital considering that it had already written down $50 million
- The on the other hand are unwilling to take more haircut on their loans. Doing so will increase the size of their impairments which are already at a record high. The Central Bank of Nigeria (CBN) has capped impairment sizes to 10% of loan book for banks. An increase beyond that means banks have to either raise capital or cut back on dividend payments.
this does not make sense.i.2 billion dollar invested by etisalats.let say,they paid about 400 millions to buy licence,which means they have liquidity to markets their products.last year some customers said elisalat gives a more friendly service,but report recently said they losing customer rapidly.
there is a risk they will close very soon. with the money lended to elisalat,they would have captured at least 20 % of the market and grow minimal to break out and makes profit,at this pace{ (i.e ) pre-recession}.they canmake it in 5 years,this recession exposes all them.this recession have expose their rearend with the blowing and gone with the wind.
meaning, they do not have a good structured organisation.management must be fired, and the injecting of new idea and blood,they need to re-structures,extend or transfer some debt to somewhere.as long as this debt is not solved or the problem risk is reduced and the replacement of the board and mangegement is energises.it is sudden death for elisalat or take over by competitator,taking this debt.
A solution can be found can be done this way,the cbn can persude those bank to swap this dollat content converted into naira,the nse waiving some codition for listing,enlistes on nse,uses ordinary shares or debenture or lien on some asset/or to buys this converted debt and spread this debt into equity.( a Debt in batches of 50 naira,100 naira,500 naira).
The banks will get off the back of tis new board and management, they may get some fund to aggressive drive in sales the new.management will be able to relax,and make long-term growth plan.