Nigerian banks have confirmed that a deal is now in place to allow 9Mobile run smoothly pending an equity injection from a new investor(s). The deal ostensibly allows banks to avoid taking a provision on 9Mobile loans.
A consortium of Nigerian banks who lent 9Mobile about $1.2 billion in 2013 put pressure on its former owner and technical partner, Etisalat UAE to bail out its Nigerian affiliate, after it had defaulted in meeting its repayment obligations.
This led to a series of negotiations that ended in a dead lock and eventually, Etisalat UAE had to pull out, effectively writing off all of its investment in its Nigerian entity and severing all ties including brand usage. Etisalat UAE shares was transferred to a Trustee, management by United Capital Plc.
Before now, Nigerian banks which had lent Etisalat money had been coy at providing more details regarding the state of the loans following the pull out of Etisalat UAE.
In an analyst call during the week, the CEO of First Bank, Adesola Adeduntan, explained to investors that 9Mobile’s cash flows were enough to avoid any impairment by the bank.
“On the part of lenders, we are trying to re-position the company till we find new investors. With the level of cash flow we believe there will be no need for impairment,”
A Reuters report also claims FCMB revealed that the banks had agreed to extend the $1.2 billion loan in what looks like a restructuring deal pending when a new investor is secured.
Likely Implication
By restructuring the loans, it appears Nigerian banks may have extended the tenor of the facility to accommodate the telco’s cash flow thus ensuring a debt service obligation that is compatible with the cash generating capability of 9Mobile.
If this is the case, then most banks will avoid taking specific provisions on the 9Mobile loans as it will considered as performing by their regulator, the CBN.
The CBN is also directly involved in this debacle, having stepped in with the NCC to avoid a liquidation of the telco and further job losses. The CBN is yet to confirm if it provided bail out funds to 9Mobile, prior to the restructuring of the loans.
Banks involved in the loan deal include;First Bank, Zenith Bank , GT Bank, , UBA , Access Bank, Ecobank, FCMB, Fidelity Bank, Stanbic IBTC Bank and Union Bank. GT Bank with $138 million in outstanding loans to 9mobile and Access Bank with $131 million are among the most exposed.
