22 Oct 2015 – Aiteo Group, the Nigerian energy company which led the consortium that acquired an 45% stake in Shell’s Oil Mining Lease (OML) 29 in Nigeria, is working with its lenders on a restructuring of the bank debt raised to finance the acquisition, said a source close and two sources familiar with the situation.
The company is trying to relax covenants on its existing loan facility, said the source close. Work on a corporate debt restructuring (CDR) report has started and once the report is completed, in four to five months, the debt restructuring will actually take place, he said.
The Aiteo-led consortium raised USD 2bn in debt in July of last year to back the acquisition of the oil asset, said the source close. The USD 2bn financing package had a five-year tenor and was split between a USD 1.5bn loan provided by a group of Nigerian banks and a USD 500m vendor loan provided by Shell itself in exchange for takeout of crude from the asset, explained both the source close and the first source familiar with the situation.
The USD 1.5bn loan was provided by Africa Finance Corporation, Fidelity Bank, First Bank of Nigeria, Guaranty Trust Bank and Zenith Bank.
According to the source close to the situation, the restructuring will not involve an extension of the loan maturity, because the loan backed the acquisition of a license expiring in 2019, so it would be impossible to extend the loan beyond the license duration.
However, every attempt to restructure a similar facility without extending the maturity would be like “kicking the can down the road”, said the first source familiar, adding that the company is probably trying to obtain a license extension to match the potential lengthening of the loan maturity.
All the acquisitions of Shell’s assets in 2014 are now in restructuring, continued the same source, adding that Aiteo’s acquisition was a “particularly leveraged one with very little equity.”
A few international lenders participated in last year’s round of acquisitions of some of Shell’s licenses, which were mostly backed by US dollar-denominated debt provided by local banks.
Most of the loans were raised and closed a few months before the drop in international oil prices, which put the buying companies in distress over the last year.
While a bank debt restructuring seems to be the only way out for the lenders that provided debt to the purchasers last year, another option for the companies involved would be to raise equity levels, with consequent damage for the initial shareholders, said the source familiar.
For private equities this is “the perfect storm: distressed situation, low prices […] everything optimises the level of entry,” he continued.
Canada’s Mart Resources was the leading company in the consortium that bought OML 18 from Shell; Nigeria’s Newcross Exploration and Production bought OML 24; the Aiteo-led consortium bought OML 29 and James Bay was expected to buy OML 25 but the deal has not closed yet.
by Davide Barbuscia and Katie McQue