Ecobank Transnational Incorporated (ETI) Plc, the pan-African financial services holding company for the Ecobank group, is billed to issue about 6.7 billion ordinary shares under a $400 million convertible bond issue already authorized by its shareholders.
Businessamlive gathered that the convertible bond issue will include equities option that allows unit holders to convert their bonds to equities in a middle-of-the-road debt-to-equity financial structure that has become a regular feature of the pan-African group.
Although details of the $400 million convertible bond issue are still being structured, Ecobank has already indicated that the convertible bond issue will have a maturity of five years and a coupon of 6.46 percent above three-month LIBOR, with an option to convert at an exercise price of 6 US cents during the conversion period. The bonds will be on offer to all Ecobank shareholders on identical terms shortly.
The convertible bond issue would be undertaken by way of rights issue.
As rights issue, the units will be pre-allotted to shareholders on the basis of their existing shareholdings. As a convertible bond, it means shareholders can exchange the bond unit for other instrument or cash.
If fully converted, the bond issue is expected to add about N133 billion to the market capitalisation of ETI at the NSE.
Ade Ayeyemi, ETI Group Chief Executive Officer, said the funds from the $400 million convertible bond issue will be used sensibly and profitably. $200 million of the issue will be used to repay the short-term financing used in setting up the resolution vehicle while the remaining $200 million will be used for a conscious debt restructure of the maturity profile of the ETI Holdco balance sheet.
“We are proactively resolving our legacy loan issues, achieving $2 million of recoveries from the resolution vehicle in the first quarter of 2017. I am confident that these positive developments will be reflected in an improving performance from Ecobank going forward,” Ayeyemi said.
The bank had recorded a net loss of N52.6 billion in 2016, following a voluntary decision of the financial group to adopt full impairment charge for its legacy loan portfolio. ETI made a provision of N221.7 billion in the 2016 audited accounts, an increase of 110.7 per cent on N105.2 billion recorded in 2015.
The company, which is also listed on the Ghana Stock Exchange in Accra and the West Africa Stock Exchange (BRVM) in Abidjan, will use the net proceeds of the $400 million bond issue to repay the bridging finance required to create a resolution vehicle to manage Ecobank’s legacy loan portfolio and optimise the maturities of the group’s debt portfolio.
ETI had adopted similar debt-to-equities conversion in its acquisition of Nigerian bank, Oceanic Bank International Plc. Under the deal, preference shares were converted to ordinary shares. Qatar National Bank (QNB), one of ETI’s major shareholders, had used the window to increase its stake in the group.
ETI’s share price opens Wednesday at N13.27 per share at the Nigerian Stock Exchange (NSE). The conversion price for the convertible bond is expected to be about N20 per share.
Key extracts of the audited report and accounts of the ETI Group showed 29 per cent increase in operating profit before impairment losses to N188.65 billion in 2016 as against N146.04 billion in 2015.
However, with the decision for the full impairment of the legacy loan, the group recorded loss before tax of N33.71 billion in 2016 as against pre-tax profit of N40.59 billion in 2015. After taxes, net loss stood at N52.6 billion in 2016 compared with net profit of N21.25 billion in 2015. Earnings per share thus reversed from 56 kobo in 2015 to a loss of N2.58 in 2016.
