UPDATE 1-Etisalat Nigeria has repaid almost half of the loan amount before default

(Add analyst commentary, background)

LAGOS, June 22 (Reuters) – Etisalat Nigeria had already repaid $ 500 million of $ 1.2 billion in loans owed to banks before defaulting in February due to a currency devaluation, told Reuters on Thursday a senior manager.

Talks between Etisalat Nigeria and lenders to restructure the $ 1.2 billion loan agreed in 2013 failed to reach a deal, forcing banks to step in this month.

Ibrahim Dikko, vice president of regulatory affairs, said the company currently owes lenders around $ 575 million and discussions with lenders are ongoing.

The total amount of outstanding debt was $ 227 million and 113 billion naira ($ 359 million), he told Reuters in a telephone interview.

The 2013 loan with 13 local banks was a seven-year facility to refinance a $ 650 million loan and finance its network expansion. Etisalat Nigeria missed payments in February after the sharp drop in the value of the Nigerian naira inflated the value of the loan, making repayments difficult.

Exotix Capital said in a memo that Etisalat Nigeria shareholders had refused to grant further bailouts to the company to reduce the pressure or convert its bonds into equity, and as a result the telecommunications company missed its last repayment in may.

Parent company Etisalat, which holds its 45% stake in the Nigerian branch at zero value, said on Tuesday it was ordered to transfer its shares to a loan trustee by June 23, after the ‘failed negotiations.

The UAE group, which generates 3.7% of its revenue in Nigeria, questioned the justification for investing more in the local unit, when lenders asked it to recapitalize its subsidiary as an option, said sources.

Exotix said the company had suffered several years of losses due to low revenues, fierce competition and, most recently, currency losses, adding that its second largest shareholder, Abu State Investment Fund Dhabi, Mubadala, had been trying to sell his stake for some time.

A telecommunications analyst said Etisalat Nigeria may struggle to find new investors, putting lenders in a weak negotiating position, although the company may be viable if acquired by one of its rivals .

Another option could be to restructure the loan, pending the arrival of new investors, Exotix said. Etisalat Nigeria has initiated changes in its shareholder structure.

Renaissance Capital analyst said Etisalat could be worth $ 1.2 billion based on an enterprise value / operating cash flow multiple, compared to South Africa’s MTN and d other African peers.

Etisalat Nigeria has 20 million subscribers, according to Nigeria’s telecommunications regulator, making it the country’s fourth-largest mobile operator with a 14% market share. MTN owns 47 percent, Globacom 20 percent and Airtel – a subsidiary of India’s Bharti Airtel – 19 percent.

$ 1 = 315.00 naira Editing by Susan Fenton and David Evans

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