Jitters, as talk between Etisalat and Nigerian banks hit brick wall

Talks between telecoms operator Etisalat and the consortium of Nigerian banks has ended in a deadlock.  Etisalat held the meeting with a consortium of Nigerian banks in the United Kingdom.

Here is what we know so far;

• Etisalat Nigeria is owing the banks $1.2 billion.
• Etisalat took the loan to refinance an already existing loan and fund expansion of its network. To avoid a banking sector turmoil and a breakdown in investor confidence, the CBN decided to intervene, choosing a debt restructuring over a receivership.
• A tripartite meeting between the CBN, Consortium of banks and Etisalat was immediately setup culminating in this meeting in the UK.

Update from the meeting in the UK

• Etisalat missed payments leading to a meeting between the consortium of banks and Etisalat.
• Reuters reported that Etisalat met with the lenders in London on April 28, in a meeting led by Guaranty Trust Bank
• Banks insist that their preferred option is for Etisalat to get their parent company to inject equity into their Nigerian subsidiary.
• Etisalat Abu Dhabi, which owns 45% in their Nigerian subsidiary, is adamant to inject any more capital considering that it had already written down $50 million
• They on the other hand are unwilling to take more haircut on their loans. Doing so will increase the size of their impairments which are already at a record high. The Central Bank of Nigeria (CBN) has capped impairment sizes to 10% of loan book for banks. An increase beyond that means banks have to either raise capital or cut back on dividend payments.