Milost Global Inc is looking to inject as much as US$1 billion to recapitalize Nigeria’s Unity Bank PLC, which is struggling to build buffers after a slowdown in Africa’s biggest economy, according to two people familiar with the matter.
New York-based Milost offered to invest US$700 million in equity and US$300 million in five-year bonds that can be converted into shares in the Nigerian lender, said one of the people, who asked not to be identified, as talks are confidential.
The private-equity firm will get an initial stake of about 30 percent in the Lagos-based bank in exchange for its first equity investment of US$250 million, the person said.
The transaction is still subject to due diligence procedures, as well as regulatory approvals, the people said.
The first part of the deal could be completed in the second quarter of the year, one of the people said.
The rest of the cash is to be drawn down in intervals over a period of four years, provided that Unity Bank has sufficient shares to issue to Milost, one of the people said.
Some small and mid-sized Nigerian lenders are battling to rebuild capital levels after a slump in oil prices triggered a foreign-currency shortage and a contraction in the country’s economy in 2016 made it difficult for businesses to repay loans.
Unity Bank, which was formed out of the merger of nine banks between December 2005 and March 2006, in April last year said that it is in talks to sell its non-performing loans to avoid penalties after missing a deadline set by regulators on its recapitalization plans.
Nigeria’s banking regulator allows lenders to count certain classes of debt and equity among the buffers that they need to set aside to survive market turmoil without causing risk to the financial system.
An investment in Unity Bank would be Milost’s third in a publicly traded Nigerian company since it agreed to pump US$350 million into oil-services company Japaul Oil & Maritime Services PLC in February and to provide a US$250 million financing facility to Resort Savings & Loans PLC.
Several calls to the numbers listed on Milost’s Web site went unanswered.
The transaction comes as the economy of Africa’s largest oil producer shows signs of recovering from a recession after three straight quarters of expansion in GDP, which the IMF has estimated will grow 2.1 percent this year.
Net income at Unity Bank slid almost 54 percent to 2.18 billion naira (US$6.02 million at the current exchange rate) over the 12 months through December 2016, with assets of 493 billion naira, the company said in its latest annual report.
Its non-performing loans stood at 48 percent in 2016, when it reported its second straight year of negative capital adequacy ratios, the report said.
The stock has gained 10 percent this year, giving Unity Bank a market value of 15.8 billion naira.
Capital adequacy ratios across the banking industry worsened to 11.51 percent in June from 14.78 percent a year earlier, the Nigerian Central Bank said.
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