Oando lines up domestic financing

14 June 2016, Week 23, Issue 643

Oando has arranged a 94.6 billion naira (US$475.3 million) facility from 10 banks in Nigeria, the company announced last week. The company, which took its upstream subsidiary private in mid-May, said the five year medium-term note was priced at Nibor plus 200 basis points. 

The financing was co-ordinated by Access Bank, as mandated lead arranger. Participating in the deal were Access Bank, Diamond Bank, Ecobank, First City Monument Bank (FCMB), Fidelity Bank, Stanbic IBTC Bank, UBA Bank, Union Bank and Zenith Bank, according to Oando. A statement from Access Bank also included Keystone Bank in the deal.

Oando described the debt as being a “crucial part” of its strategic restructuring plans. The company’s CEO, Wale Tinubu, said the facility would run for five years, with a three year moratorium on repayment of the principal sum. “This is the pivotal leg in our group restructuring plan of growth; via the upstream business deleverage; via the disposal of US$350 million in assets’ value in 2016 and our return to profitability in 2016, driven by our dollar earning oil export and trading activities.”

The company has “ridden out the storm”, Tinubu said, with a return in oil prices to more than US$50 per barrel. As such, it “now stands diversified with higher-weighted dollar-denominated earnings, an optimised and restructured balance sheet with [a] lower cost of capital and longer tenors”. 

Access Bank said the financing would involve an immediate injection of US$195 million in cash, with a further payment, of US$130 million, within 90 days of the sale of Oando Gas & Power. As a result, Oando will focus on the downstream. The company also expects to raise between US$800 million and US$1 billion, over the next 18-24 months, from the sale of its upstream unit, Oando Energy Resources. 

The financing comes shortly after Helios Vitol Group invested in Oando’s downstream operations. 

Access Bank’s CEO, Herbert Wigwe, said the facility would allow Oando’s “growth and development [to] really take off”. 

On June 2, Oando said it had pushed back the issue of its 2015 results, but added that it intended to file them by the end of the month. 

 

Under fire

The lending comes at a worrying time for Nigerian banks. Concerns have been raised, including by the Central Bank of Nigeria (CBN), about the threat posed to the country’s banks from non-performing loans (NPLs) that have been extended to the oil and gas sector. 

In addition, a number of banks have faced investigations from the Economic and Financial Crimes Commission (EFCC) over alleged participation in corrupt practices during the 2015 election. 

Access Bank, for one, issued a statement on May 10 noting the EFCC’s visit as part of an investigation into a “specific transaction involving a customer of [Access Bank] in the normal course of business”. Following the EFCC visit, Wigwe had accompanied investigators to their office and had been allowed to leave the same day. 

Reports in local newspapers linked the raid on Access Bank, and others including Fidelity Bank and Sterling Bank, to an investigation involving former petroleum resources minister, Diezani Alison-Madueke, who was arrested in the UK in October 2015. Access Bank’s statement did not acknowledge the Alison-Madueke connection directly but did say the bank had “absolutely no link, interaction or relationship whatsoever with any of the personalities stated in the media reports”.