Ecobank Transnational Inc. has received approval from bondholders to bolster its capital buffers, helping the Nigerian lender avoid a potential default after breaching a covenant tied to a $300 million obligation.
Thank you for reading this post, don't forget to subscribe!The breach followed the devaluation of the naira. Bondholders endorsed the plan on Monday, requiring the bank to raise its capital adequacy ratio to 10%, according to a statement released Wednesday. Without creditor approval, the breach could have triggered a default.
The naira’s 45% depreciation and rising operational costs led to a sharp 77% drop in Ecobank’s pre-tax profit for the first half of the year, also causing its capital buffer to fall below the required threshold.
To remedy the situation, Ecobank will inject $10 million to lift its capital above the central bank’s 200 billion naira benchmark for national lenders.
The bank also plans to issue $200 million in Additional Tier 1 bonds, sell risk-weighted assets, and convert dollar-denominated loans to naira to cushion against further currency fluctuations.
In addition, the bank will redeem $200 million of promissory notes due in 2027 in phases and offer noteholders an early consent fee for their support.
