Dangote leans on StanChart offshore refinancing to offload $1.3bn loan to 10 banks
Category: Capital Market
Favourable offshore dollar terms offered by Standard Chartered Bank, which likes to advertise itself as the world’s emerging markets’ bank, appears to have provided the cushion for the liquidation of a $1.3 billion facility owed 10 Nigerian banks by Dangote Group, it emerged yesterday. At the Ibese, Ogun State site of a huge cement plant, one of the projects being financed with the loan, Dangote Group president, Aliko Dangote, issued final cheques to senior executives of the 10 banks who had been invited for that purpose since last November.
But BusinessDay learnt that a pre-disengagement meeting was held last Friday between Dangote management and the managements of the banks in Lagos, where both parties tidied up the paper work and drew the loan agreement to a close.
BusinessDay’s investigations among corporate bankers in Lagos yesterday show that the feat of repaying the facility 66 months ahead of maturity was made possible by an offshore refinancing facility being provided by United Kingdom-based Standard Chartered Bank.
It is not clear what the total value of StanChart’s refinancing loan to Dangote is as officials of both parties were keeping a lead on the figures yesterday. Sources familiar with the deal, however, said the original loan had N71.8 billion (or $479 million at N150 to the dollar). But what bankers in Nigeria and the UK familiar with how such loan deals are structured were telling BusinesssDay last night is that Dangote may have taken advantage of favourable dollar loan costing in the international financial market.
For instance, the original loan, a total of N150,932 981,000.00 was structured as a 90 day facility linked to the Nigerian Interbank Market Rate (NIBOR) over the preceding 90 business day period plus 100 basis points. GTBank provided N19,593,971,000; both First Bank and FCMB N19, 580, 980, 000.00 each, while seven other bank each provided N13,168,150,000.
“It is very simple, this is a clever move by Aliko Dangote, the cost of such funds is in the region of eleven and single digit in the international market. In Nigeria, that particular facility was doing between 18 and 20 percent, exclusive of other charges at some point. So, it was only wise for him to choose this option”, one banker very close to the local banks’ deal with Dangote told BusinessDay. In fact, the last time the loan was reviewed, BusinessDay learnt it was doing 16.72 percent NIBOR plus 100 basis points.
Before yesterday’s settlement of the loan with the local banks, BusinessDay learnt that Dangote had constantly been in talks with various other offshore banks who had being hovering over the facility with a view to gaining a foothold into it. It was learnt that HSBC, the UK’s largest bank, is one of the banks to have held talks with Dangote to refinance the facility but may have lost to StanChart over terms. The original loan with the local banks was structured over seven years and was taken in May 2008 for its cement expansion project that cover plants in Obajana and Ibese in Nigeria, as well as Senegal and other sub-Sahara Africa countries.
Yesterday, Aliko Dangote said the project was still on course, promising that on completion, it would boost cement production in the country with the possibility of bringing the price of a bag of cement down to N1,000. He also said the group has plans to consolidate all its cement companies into a single entity, giving clear signals of the possibility of the capital market witnessing a mega merger this year.
“The Dangote Group is embarking on consolidating our cement assets in line with our strategy to consolidate our Nigerian assets. As a result of this, we have decided to repay the $1.27 billion loan facility we took in May 2008 from a consortium of 10 banks,“ Dangote explained. The 10 which got full repayment yesterday are GTBank, First Bank, Zenith Bank, FCMB, Fidelity Bank and Stanbic IBTC. Others are UBA, Afribank, Access Bank and Bank PHB.