Nigeria: 9Mobile to escape full repayment of $1.2 billion debt
25 August 2017
9Mobile, formerly Etisalat Nigeria, the consortium of 12 banks involved in the $1.2 billion 9Mobile loan – a loan the firm took out four years ago; however, failed to repay due to a currency crisis and the economic recession – are separating a large portion of the debt from their books ahead of the December 31 end-date for the fiscal year, this is according to the Nigerian Communications Week.
This has led to Etisalat International pulling out of the Nigerian branch and leading the company to subsequently change their name, board and management structures in a re-branding. Zenith Bank, GTBank, First Bank, United Bank for Africa, Fidelity Bank, Access Bank, Ecobank, First City Monument Bank, Stanbic IBTC and Union Ban are the banks involved in the loan.
Zenith Bank announced that it had made a provision on 30 per cent of its loan to 9Mobile. Peter Amangbo, bank’s Chief Executive Officer said: “We have taken about 30 per cent as a provision, which we believe is very prudent as the company is undergoing restructuring to prepare for a new investor.”
Zenith Bank is reportedly the largest lender to 9Mobile, but the bank has declined to disclose its exposure to the telecoms group. The Tier-1 lender had last week reported a pre-tax profit of N92.18 billion for its half year against N53.91 billion a year ago.
The Central Bank of Nigeria (CBN) and the Nigerian Communication Commission (NCC) in July saved Etisalat Nigeria from collapse, stopping the company from going into receivership.
Richard Obire, Former Keystone Bank Executive Director said many other banks were likely to provide for certain percentage of the loans, depending on their profitability positions. He said Zenith Bank, being a highly profitable bank, was thinking that it might not be able to recover all the money. “Zenith may be considering that when it gets down to negotiation with 9Mobile, it may end up giving about 30 per cent of the debt. The debtor may ask for more restructuring and loan forgiveness,” Obire said.
According to him, some banks are conservative and may want to stay within the five per cent regulatory non-performing loan threshold while some may want to exceed the limit. “Banks that are making more money are more likely to provide for their loans than those with less profitability,” he said. Obire said by exceeding the 10 per cent peg for sub-standard loans to go for 30 per cent provision, Zenith Bank was indirectly saying that although the loan was not doubtful, it was more than sub-standard. “If the bank does 30 per cent provision on the loan in 2017, it may do 50 per cent in 2018 while considering the variables surrounding the loans,” he said.
Olakunle Ezun, Head Treasuries at Ecobank Nigeria, said it is expected that the banks will provide for the loan, which he described as a bad debt. “For now, the 9Mobile loan is like a non-performing loan for the banks. I understand that the banks are trying to restructure the loan. If they succeed, it will become a performing loan; otherwise it will have to be provided for in their books,” he said.
He said more banks may provide for the loan by year-end, but such a decision will be determined by the boards and their interpretation of the future of 9Mobile
Source: The Nation