Nigeria's Skye Bank in talks for debt refinancing

Skye Bank is set to test the appetite for Nigerian FI syndicated loans as it looks to refinance a syndicated facility of $84 milion that matures on September 18, banking sources said.

One of Skyebank branches

Skye will be the first Nigerian bank to tap the market this year – Zenith signed a two-year $300 million murabaha facility in December.
However, depressed oil prices and the delay in selecting a cabinet following President Buhari’s election in May mean bankers are uncertain what the outcome of the Skye Bank deal will be.
“Nigerian banks are in a challenging environment – most banks are not looking to extend to second tier credits,” said one syndicated loans banker. “Whether the banks involved all just roll over is yet to be seen; market perception of Nigeria is not good.”
Skye Bank’s one-year deal signed last September and was arranged by Mashreqbank, with Banque Marocaine du Commerce Exterieur, Banque SBA, Mauritius Commercial Bank and United Bank acting as arrangers, and Bank Al Habib and Diamond Bank as managers.
One option for Skye Bank would be to raise funds using a receivables-type structure based on remittance payments, dollars sent back to Nigeria by nationals living and working abroad.
Skye Bank is the only Nigerian bank to have already used this structure, on a five-year $150 million loan signed in 2012. Standard Bank, Citigroup and African Export-Import Bank were bookrunners on that deal.
“Turkish banks have used this structure in the past; it can be very effective” said a second banker. “The bank doesn't even have to be trading, as long as the doors are open and it remains a going concern – with the cash ring fenced in an SPV – it can work.”
Pricing poser
Pricing on the loan could still be a major consideration for Skye.
“It comes down to whether it will allow Skye to benefit on pricing, what is the cost, is it cheaper funding?” said a third banker.
“We are in a vicious commodities cycle, there is lots of cheap oil in the market and with oversupply looking set to only increase it is debatable on what terms banks will be willing to lend, even using this structure.”

A whole raft of Nigerian banks signed loans in the second half of last year, including Africa Finance Corp (US$300m), Fidelity (US$125m), United Bank of Africa (US$225m) and Ecobank (US$150m). Ecobank is the next to face a maturity after Skye Bank – on October 22 – for its one-year debut loan.
With various maturity dates between 2015 and 2017, not all Nigerian banks face immediate refinancing concerns, but bankers say they have been approached by a few Nigerian names in recent weeks looking for funding.
“Nigerian banks have been funding themselves overnight in the swap market at between 7.0 percent and 8.5 percent, but I don’t know how long this will be possible,” said the first banker. “We have seen a few names approaching banks for loans.”