Etisalat Crisis: Sue Mubadala investors insist

Features & Reports

Shareholder groups in the capital market, speaking to the News Agency of Nigeria have advised Etisalat Nigeria to settle the $1.2 billion debt it owes 13 commercial banks to avoid a takeover as the banks insist on the prosecution of the foreign directors of Etisalat Nigeria and its principal Mubadala.

The banks claim the Mubadala – appointed CFO of Etisalat Nigeria ( name withheld) diverted over $700,000 from proceeds of the sale of its towers it earned when it sold to IHS – a Nigerian towers and telecommunications infrastructure provider. According to bank officials they had financed the import and purchase of the towers through Huawei of China to help build the infrastructure backbone for Etisalat. But when the telco earned hard currencies from the sale, Etisalat failed to repay their USD loans as was done by other telcos like MTN and Airtel.

” It makes no sense that the Etisalat CFO simply exchanged the USD they earned at the official rate of $/ N200 when the forex markets was at almost $/N400 and used it for other purposes” said a bank risk official at the weekend. ” Had they paid of the USD loans with the USD they earned from sale of the towers there would absolutely been no problem today”

When contacted, Etisalat official who spoke to THISDAY, on conditions of anonymity, said that their CFO converted the USD to Naira and used the proceeds to pay off Naira loans because it had a higher Naira interest rate. But the banks are crying foul saying why would they elect to hold a USD loan when revenues are in Naira and USD scarce? ” So when you get a rare USD revenue inflow, the only sound governance is to pay off USD debts and reduce foreign exchange risk.

That Finance Director from Mubadala and Etisalat in AbuDhabi has questions to answer over the transaction which may have led the the bad loans through reckless and fraudulent trading, ” insisting they must be held to account after Etisalat moved to pull out of Nigeria with our paying off the debt.
The shareholder groups insisted that Etisalat must settle its indebtedness to the banks, so that the lenders in turn can pay dividends to their shareholders.

Mr. Boniface Okezie, National Coordinator, Progressive Shareholders Association of Nigeria, called on Etisalat to settle the debt owed the commercial banks to avoid legal action, adding however that the affected banks should approach the court for receivership if Etisalat failed to settle the debt.

He stated that the banks had obligations to their shareholders, insisting that the debt must be paid.
Also, Mr. Godwin Anono, the Chairman of Nigeria Professional Shareholders Association, said that the network operator should settle the debt and desist from making unnecessary noise about the whole thing.
He said the transaction was in line with customer-banker relationship, noting that the terms and conditions of the loan must be met.

Anono said further that the shareholders were in support of the banks to acquire the company if Etisalat failed to settle the loan.
“This is like any other transactions, it’s not government business and I stand on existing protocols that the banks should acquire the company,” he said.
In his view, Mr. Sewa Wusu, Head of Research, SCM Capital Ltd., said that the issue of loan between Etisalat and the consortium of banks was a customer-banker relationship, which ought to be settled amicably with terms agreeable to both parties.

He said that the issue was beginning to elicit concerns in the banking industry given the level of the amount involved and its potential impact on the balance sheets of the banks involved.
“But I think the monetary authority is also involved to ensure prompt settlement of the situation among the parties,” he said.
Etisalat Group in the United Arab Emirates, on June 20, said it had transferred its 45 per cent stake and 25 per cent preference shares in Etisalat Nigeria to a loan trustee.
It said it had been notified to transfer its stake by June 23, saying that the stake had a carrying value of zero on its books.

However, in the last few months, Etisalat Nigeria has been in talks with Nigerian banks to restructure $1.2 billion loan after missing repayments.
The loan is a seven-year facility agreed with 13 banks in 2013 to refinance a $650 million loan and for funding expansion of its network.

Although the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) had stepped into the fray to prevent a takeover by the banks, the discussions failed to produce an agreement on the debt restructuring.Another meeting with the regulators is scheduled for Friday or Monday according to sources familiar with the transactions.

But as the shareholder groups fret over Etisalat’s indebtedness to the banks, another crisis is about to rear its head in the petroleum sector which may lead to fuel shortages around Nigeria, following the move by 18 Nigerian lenders to commence the process of classification of loans that were extended to oil marketers and depot operators in the downstream sector of the oil and gas industry, but is now turning bad in the books of the banks following the failure of the Finance Ministry to pay subsidy and FX differential claims from 2013 and 2014.

THISDAY gathered that if the debts are not paid by the marketers and the Federal Ministry of Finance, the banks will begin seizing the marketers’ tank farms in lieu of the NPLs, which could potentially lead to massive job losses in the sector and fuel shortages.
The indebtedness of the marketers to the banks followed the failure of the federal government to pay the outstanding subsidy claims and matured letters of credit (LCs) arising from the old subsidy regime, which amounted to about $2 billion.

THISDAY had reported that the huge debts, which grew as a result of the naira devaluation and the interest charges by the banks that funded the importation of fuel cargoes, have since forced foreign banks such as the Citi Bank, BNP Paribas and others to stop opening lines of credits for oil marketers.

The development has also led to the Nigerian National Petroleum Corporation (NNPC) assuming the role of sole importer of petrol, as marketers focus on the importation of diesel, which has no price cap, having been deregulated.
There are also speculations that the marketers could shut down their depots on July 1, in protest against their unpaid subsidy claims.

When contacted by THISDAY, the Chairman of Depot and Petroleum Products Marketers’ Association (DAPPMA) and Chief Executive Officer of Heyden Petroleum Limited, Mr. Dapo Abiodun declined to speak on the alleged threat by the marketers to shut down their depots on July 1.
Also, the Executive Secretary of DAPPMA, Mr. Femi Adewole said he was not aware of any planned shutdown of depots by DAPPMA but confirmed that the banks have initiated moves to seize the tank farms of marketers for failure to liquidate the loans.

According to him, lack of working capital due to huge debts owed marketers by the federal government has eroded their ability to source funds from the banks for imports.
“Banks have equally classified marketers’ accounts with the aim of seizing tank farms due to the bad loans,” he said.

“When we say that the banks have classified the accounts of a marketer, we mean that such a marketer is owing one bank a loan whose repayment is long overdue and no other bank would give such a company any loan whatsoever,” Adewole added.

Documents obtained by THISDAY showed that when the debts owed the marketers by the federal government was last reconciled in 2016, the outstanding balance was $1,522,111, 841.10.
The documents also showed that the Major Oil Marketers’ Association of Nigeria (MOMAN) and DAPPMA members were originally indebted to 18 Nigerian banks to the tune of $1,184,621,931.17 before interest charges and exchange rate differentials pushed the outstanding claims to $2 billion, according to marketers, who spoke off the record.

Detailed data on the marketers’ original indebtedness to the 18 banks revealed that 16 banks initially had $911,336,510.11 as outstanding unliquidated LCs with DAPPMA members, while nine banks had $273,285,421.06 as outstanding unliquidated LCs with MOMAN members.
According to the marketers, no reconciliation of unpaid subsidy claims has taken place between the marketers and the federal government since the beginning of 2017.

In a communiqué at the end of a recent meeting in Lagos, DAPPMA had expressed the fears that the Asset Management Corporation of Nigeria (AMCON) might take over their tank farms as a result of the NPLs.
“Some of our members have resorted to staff retrenchment due to inactivity,” the marketers had added.

Acting President Yemi Osinbajo at a meeting on May 22 was said to have directed the Minister of Finance, Mrs. Kemi Adeosun to initiate the process of paying the oil marketers all outstanding subsidy claims.
Osinbajo had summoned the meeting with the marketers in which Adeosun, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu and the central bank governor, Mr. Godwin Emefiele were said to be in attendance.

—Thisday Report