Etisalat Nigeria Owners Said to Face Write-offs After Default

LAGOS (Capital Markets in Africa) – Lenders who took over Etisalat Nigeria last month after the wireless carrier defaulted on $1.2 billion in debt are being advised to take a writedown to ensure a planned sale of the company is successful, according to people familiar with the matter.

Whether to write down the asset has emerged as a sticking point between the owners, who include Nigerian lenders Access Bank Plc, Guaranty Trust Bank Plc and Zenith Bank Plc, and investments banks including Citigroup Inc. and Standard Bank Group Ltd. that are in talks to lead the sale process, said the people, who asked not to be identified as the negotiations aren’t public. The investment banks want the owners to agree to take a write-down before the sale moves forward, they said.

While such a move would expedite a sale, a write-down could prove costly. The carrier, which has been rebranded 9mobile, owes creditors and suppliers as much as $1.2 billion, the people said. That’s more than a price tag of about $700 million that’s based on a ratio of five times earnings before interest, taxes, depreciation and amortization, one of people said.

Oluseyi Osunsedo, a spokeswoman for 9mobile, said by text message she couldn’t comment. The carrier’s chairman, Joseph Nnanna, said this month the board would “ensure that the company remains stable and the banks that lent it money do not suffer loss.”

Oluwatoyin Sanni, head of United Capital Trustees Ltd., which manages the lenders’ shares in 9mobile, didn’t answer calls or a text message.

The new owners seized control of 9mobile last month from Abu Dhabi-based Emirates Telecommunications Corp. following the failure of debt-restructuring talks. The consortium is now turning its attention to offloading the company, the smallest of Nigeria’s four mobile-phone operators with 20 million subscribers. Its three larger competitors are Johannesburg-based MTN Group Ltd., the market leader with 60 million customers, India’s Bharti Airtel Ltd. and Lagos-based Globacom Ltd.

While Emirates Telecommunications owned 45 percent of Etisalat Nigeria, Abu Dhabi-based wealth fund Mubadala Investment Co. agreed to start handing over its 40 percent stake.

Nigerian companies have suffered since the 2014 oil-price crash triggered an economic contraction and sent corporate earnings plunging. Rampant inflation reduced consumers’ purchasing power and the central bank’s tightening of capital controls led to a shortage of dollars, which companies need to pay for imported equipment and service foreign-currency loans.

Godwin Emefiele, the governor of the Central Bank of Nigeria, told reporters on Tuesday there was a “surge” of investors interested in 9mobile and a sale may be agreed this year.

Source: Bloomberg Business News