Seven Nigerian banks in N200bn syndicated loan with MTN

A consortium of seven Nigérian lenders: Access Bank, GT Bank, Zenith International Bank, Fidelity Bank, First City Monument Bank, United Bank for Africa and First Bank of Nigeria Limited have on Friday signed a seven-year N200 billion medium term facility with MTN Nigeria Communications Plc.The company stated this in a statement by its Company Secretary, Uto Ukpanah, to the Nigerian Stock Exchange (NSE) in line with its post listing requirements. The telecommunications firm said the facility was coordinated by Citibank, while Quantum Zenith acted as facility agent.

It noted that the medium-term facility would enable the company to fund its evolving business opportunities while assisting with capital expenditure and working capital, to deliver enhanced customer service.

Commenting on the facility, Ferdi Moolman, the company’s Chief Executive Officer, said the facility indicated MTN’s confidence in Nigeria and local financial institutions.

“This facility expands our existing successful domestic debt programme which we are using to fund increased network capacity and the expansion of both the voice and data services on our network to customers in new areas.

“We have enjoyed remarkable funding support for Nigeria’s financial institutions since our first facility in 2003 and this has been critical to the development of the largest telecommunications network in Africa,” Mr Moolman said.

He added that the syndicated loan showcased the strength of the Nigerian financial institutions and their confidence in MTN’s vision as well as both parties joint ability to stimulate significant economic growth.

The loan syndication came a day after the listing of MTN Nigeria Communications shares on the Nigerian Stock Exchange (NSE).

• MTN Nigeria changes from private company to PLC

MTN Nigeria on May 16 listed a total of 20.35 billion shares at N90 per share.

Meanwhile, though MTN Nigeria Plc recorded strong profitability, a herd of financial experts from Cowry Assets Management Limited are concerned about the firm’s debt ratio. This according to the experts entails that the company is overleveraged, with total debt ratio of 1.67x based on interest bearing liabilities of N251.79 billion and total equity of N194.79 billion. They further stated that with the issuance of N200 billion worth of commercial paper, MTN’s interest expense is expected to increase further from N23.77 billion recorded in Q1 2019 (having increased y-o-y by 54% from N15.45 billion), thus reducing profitability. Overleveraged companies often struggle to pay their operating expenses because of excessive costs due to their debt burden such as interest payments and principal repayments.