A Thisday Exclusive by Festus Akanbi, 04.25.2010
The management of the debt-ridden Nigerian Eagle Airline, formerly known as Virgin Nigeria changed hands at the weekend following its take over by the Group Managing Director of Nicon Group, Mr. Jimoh Ibrahim.
A competent source told THISDAY yesterday that the deal, which was struck last week, got the go-ahead of the company’s creditor, United Bank for Africa Plc, after a vigorous negotiation process. According to the source, part of the agreement with the bank was to allow the new management inject fresh funds into the airline to enable it cope with the emerging challenges in the aviation sector. The debt owed UBA by the airline will then be serviced after the company must have found its feet.
THISDAY also learnt that a merger between Nigerian Eagle and NICON Airways, one of the companies earlier taken over by Ibrahim’s group, is in the offing. Following the takeover, the new management has redeployed the airline’s executive director (finance) although his new portfolio was not disclosed as at yesterday.
However, the airline’s chief executive officer, Captain Dapo Olumide retains his position. Ibrahim said at a news conference yesterday that the company’s turnaround would start with a diagnostic review of all files and status reports of the company and will take up to two years.
He explained that Olumide was retained because of a vote of confidence passed on him by the board of the airline. He said conscious efforts would be made to safeguard the integrity of the nation through the operation of the Nigerian Eagle Airline.
Ibrahim, who said the new management was not envisaging a geometric growth for the company, said the turnaround process would be conservative and arithmetical. He said safety and human resources would be his topmost priority.
Consequently, Ibrahim has directed that all maintenance contracts be left completely in the hand of Lufthansa Technik. He has also directed the payment of all outstanding liabilities to the German company.
“We had made payment of all outstanding liabilities to Lufthansa Technik as at close of hour of business and they will be responsible for the fleet without interference. He directed that the managing director should commence the process of acquisition of three aircraft that is already outstanding and it must be completed before the end of May 2010,” a statement from the company read.
When asked about the future of NICON Airways, Ibrahim said that he ordered the suspension of NICON Airways to give room for its re-launch into the aviation industry and said the present transaction would provide another opportunity for NICON Airways to merge with Nigerian Eagle Airline.
Olumide, in his initial reaction, assured the staff of Nigerian Eagle Airline to brace up to the challenges that the turnaround programme may pose and assured them that all will be done to ensure a successful outing for the company. According to him, safety and human resources are top priority of the turnaround plan.
A restructuring of Nigerian Eagle's ownership was necessitated by the Virgin Atlantic Airways' decision to distance itself from the Lagos-based carrier. Virgin was seeking a buyer for its 49 per cent stake in Nigerian Eagle. The remaining 51 per cent is held by Nigerian institutional investors.
A $185 million private placement memorandum was issued through UBA Capital. The bank is itself a shareholder in the airline, but intends to reduce its holding.
"They want to be the lead banker for the airline. They are in for the long term, but they have got to reduce their exposure to a sensible level," explained Olumide at the recent African Airlines Association meeting in Maputo, Mozambique.
The company, had in its search for potential equity partners hired a consultancy firm, Ernst & Young. There has been "a lot of interest" from the Middle East, says Olumide, but the airline is also targeting potential African investors.
Although the percentage of the ownership of the new management is yet to be made public, there are indications that Ibrahim has indeed taken a controlling stake in the airline.
Olumide had predicted that a private buyer would want a controlling stake of 51 per cent or more, comprising Richard Branson-owned Virgin's 49 per cent and some of the shares held by Nigerian institutional investors.
He said the airline would ultimately choose "one or the other" between the UBA private placement, which is a debt solution, and the "straightforward equity" option through Ernst & Young.
Experts had said that for Nigerian Eagle Airline to go down the equity path, it would look to raise a minimum of $200 million. Around $50 million would be used to pay back part of a $100 million convertible bond held by UBA. The remainder would be used for capital projects, such as the airline's order for seven Embraer 170s and three 190s. Efforts to get the reaction of UBA officials yesterday failed as the bank’s spokesperson, Charles Aigbe could not be reached on phone.