Nigerian banks could start facing financial restructurings within six months, with some banks now unable to repay their debt as depressed oil prices continue to weaken balance sheets, bankers said.
The continuing low oil prices and the Nigerian government& rsquo;s slowness to react to the country’s looming bank crisis could create difficult financial situations for Nigerian banks increasingly unable to repay their debt.
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In August, Nigeria’s Skye Bank started discussions to refinance a syndicated facility of US$84m that matured on September 18. After subsequently failing to repay US$42m of the loan the bank is now in discussions with individual lenders on how to reorganise its debt, one of the bankers said.
The one-year deal was signed in September 2014 and was arranged by Mashreqbank “ It is not good & ndash; they have not repaid 50 percent of their loan. Skye needs to talk to its lenders,” the banker said.
Since July, a number of Nigerian banks have also been unable to repay shorter trade finance loans and if the situation continues this could lead to a wider restructuring or rescheduling of Nigerian bank debt. “I first started hearing about banks not repaying trade loans back in July.
Since July, a number of Nigerian banks have also been unable to repay shorter trade finance loans and if the situation continues this could lead to a wider restructuring or rescheduling of Nigerian bank debt. “I first started hearing about banks not repaying trade loans back in July.
The government needs to address this quickly. If the situation continues for another six months, banks are going to have to start talks about some form of debt rescheduling,” the banker said.
NEW RULES
In December last year the Central Bank of Nigeria imposed new regulations on Nigerian banks that require those with exposure to the oil and gas sector in excess of 20 perceent of their total credit facilities to hold provisions of 125 percent against those assets.
This has deterred Nigerian banks from taking on new loans so far this year.
But with a growing need for dollar funding and funding in the swap markets, which earlier this year was costing Nigerian banks between 7.0 percent & ndash; 8.5 percent, now closed, Nigerian bank borrowers now have little choice but to approach the international syndicated loans market again, a second banker said. “I don’t think they have much choice, there is a liquidity concern, they need dollars,” he said.
For the stronger players that have managed to service their debt, a market for syndicated loans is there – but at double the prices paid last year, with new deal margins expected to be hiked up to between 550bp and 650bp, and with much shorter tenors. “There is still appetite for stronger Nigerian banks but they will be better priced with less ambitious tenors. There are no RFPs; select banks will lend to them on a relationship basis. Nigerian banks can’t pick and chose,” a third banker said.
IN THE MARKET
Ecobank and First City Monument Bank are both in the market to refinance their debut US$150m loans, which were signed in October 2014. Ecobank is looking for a US$120m loan and FCMB for a US$150m facility. Bankers expect that they will be able to raise these loans but only with a the steep increase in prices. “These deals will get done but the banks will pay a premium,” the
first banker said. “This will distort the market, nobody likes to refinance at a higher price.” Nigeria’s Stanbic IBTC Bank’s new US$100m deal, which was launched a month ago will fair slightly better due to its smaller exposure to the oil and gas sector, but even here a shorter tenor and higher pricing are expected.
The one-year loan, which is set to close on November 18, will pay just under 400bp, the second banker said. The same loan a year ago would have been able to attract US$500m for a three-year facility paying around 250bp, he said.
Mashreqbank is coordinating the deal for Stanbic IBTC but European relationship lenders from Germany and Austria have been leaned on to get the deal done, the second banker said. In addition pricing was revised up by 50bp post-launch.
In contrast, elsewhere in Africa appetite for bank deals is still strong, even from Middle East Banks that themselves are facing an increasing liquidity squeeze.
NEW RULES
In December last year the Central Bank of Nigeria imposed new regulations on Nigerian banks that require those with exposure to the oil and gas sector in excess of 20 perceent of their total credit facilities to hold provisions of 125 percent against those assets.
This has deterred Nigerian banks from taking on new loans so far this year.
But with a growing need for dollar funding and funding in the swap markets, which earlier this year was costing Nigerian banks between 7.0 percent & ndash; 8.5 percent, now closed, Nigerian bank borrowers now have little choice but to approach the international syndicated loans market again, a second banker said. “I don’t think they have much choice, there is a liquidity concern, they need dollars,” he said.
For the stronger players that have managed to service their debt, a market for syndicated loans is there – but at double the prices paid last year, with new deal margins expected to be hiked up to between 550bp and 650bp, and with much shorter tenors. “There is still appetite for stronger Nigerian banks but they will be better priced with less ambitious tenors. There are no RFPs; select banks will lend to them on a relationship basis. Nigerian banks can’t pick and chose,” a third banker said.
IN THE MARKET
Ecobank and First City Monument Bank are both in the market to refinance their debut US$150m loans, which were signed in October 2014. Ecobank is looking for a US$120m loan and FCMB for a US$150m facility. Bankers expect that they will be able to raise these loans but only with a the steep increase in prices. “These deals will get done but the banks will pay a premium,” the
first banker said. “This will distort the market, nobody likes to refinance at a higher price.” Nigeria’s Stanbic IBTC Bank’s new US$100m deal, which was launched a month ago will fair slightly better due to its smaller exposure to the oil and gas sector, but even here a shorter tenor and higher pricing are expected.
The one-year loan, which is set to close on November 18, will pay just under 400bp, the second banker said. The same loan a year ago would have been able to attract US$500m for a three-year facility paying around 250bp, he said.
Mashreqbank is coordinating the deal for Stanbic IBTC but European relationship lenders from Germany and Austria have been leaned on to get the deal done, the second banker said. In addition pricing was revised up by 50bp post-launch.
In contrast, elsewhere in Africa appetite for bank deals is still strong, even from Middle East Banks that themselves are facing an increasing liquidity squeeze.
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