$1.2bn debt: You must pay back in dollars, Banks tell Etisalat

The loan crisis that is threatening to swallow Etisalat Nigeria took a new twist as the 13 Nigerian banks it owed $1.2 billion rejected the telecom service proposal for an amicable settlement, National Daily has gathered.

At a peace meeting organised by the Central Bank of Nigeria, the banks opposed a proposal by Etisalat Nigeria to convert part of the $1.2bn loan from dollars into Naira, insisting that the parent company, Etisalat and its other shareholders to recapitalize.

According to a source with the knowledge of the negotiations, the seven-year syndicated loan, on which Etisalat Nigeria missed a payment, has a dollar portion of $235 million which the telecoms operator wants to convert into naira to overcome hard currency shortages on Nigeria’s interbank market.

“Etisalat is asking for us to convert the dollar component to naira but banks don’t want that option and have told them to talk to their parent to settle the loan,” the source said, adding that regulators favoured the conversion.

Most of the 13 lenders involved in the Etisalat Nigeria loan had raised dollars abroad to participate, meaning that further naira weakness would see them receive fewer dollars.

The currency had lost half of its value since the loan, which matures in 2020, was made. Interest is due monthly and the next principal payment is due in May, the source said.

Etisalat had written down the value of Etisalat Nigeria last year to $50 million due to naira weakness, Moody’s said in a note, adding that the default at the affiliate company did not affect the parent’s credit profile.

National Daily gathered that Etisalat owes GT Bank 42 billion naira, Access Bank 40 billion naira and Fidelity Bank 17.5 billion naira.

ALSO SEE: See how much troubled Etisalat Nigeria owes GT Bank

The loan saga started last week when the telecom company informed its creditors in February that it would miss payment on the $1.2 billion loan.

Apparently, the banks feared that inability to recover the loan could expose them to the Asset Management Company of Nigeria, AMCON, which had been demanding immediate cut down on the rate of their non-performing loans.

However, the banks claimed that Etisalat had failed to service the debt as agreed since 2016. They subsequently reported Etisalat to the Central Bank of Nigeria, CBN, and its communications sector counterpart, National Communications Commission, NCC.

Meanwhile, the NCC and CBN had prevailed on the three local banks to pursue a default deal rather than a receivership for Etisalat Nigeria so as not to deter investors and to avoid a wider debt crisis.

Etisalat Nigeria has 20 million subscribers, according to Nigeria’s telecom regulator, making it the country’s number four mobile operator with a 14 percent market share. South Africa’s MTN has 47 percent, Globacom 20 percent and Airtel – a subsidiary of India’s Bharti Airtel – 19 percent.