Crude oil prepayment facility: UBA, Afreximbank announce $2.25bn initial disbursement
United Bank for Africa Plc (UBA) and the African Export-Import Bank (Afreximbank) have announced an initial disbursement of $2.25 billion under a syndicated $3.3 billion crude oil prepayment facility sponsored by the Nigerian National Petroleum Company Limited (NNPCL).
A second tranche of $1.05 million is expected to be disbursed subsequently.
This is the largest syndicated loan ever raised by Nigeria in the international market and one of the largest syndicated transactions in Africa in recent years.
The 5-year facility carries a margin of 6.0 percent per annum above the 3-month secured overnight financing rate (SOFR).
The facility will support Nigeria’s macroeconomic stability and long-term economic growth, facilitating access to raw materials and trade development.
“This facility further demonstrates the bank’s commitment to supporting African economies, when such assistance is most needed. Afreximbank stands by its member countries in good and in difficult times,” Benedict Oramah, president and chairman of the board of directors, Afreximbank stated.
According to him, the disbursement of the initial $2.25 billion under the facility will support Nigeria’s long-term economic stability, ease access to import financing for raw materials and essential goods, support industrialization and trade development efforts.
“We are pleased that despite the typical year-end pressures, our partners and investors committed the funds required in record time,” Oramah stated.
The transaction structure has an embedded price balance mechanism where 90 percent of all excess cash from the sale of the committed barrels (after debt service) will be released to the borrower.
Also, the balance of 10 percent will be used to prepay the facility, effectively shortening the final maturity of the facility and freeing cashflow from future pledged cargoes for use by Nigeria.
“UBA is delighted to participate in this transaction, which demonstrates once again UBA’s commitment to providing necessary interventions and solutions towards addressing economic issues in Nigeria and across Africa,” Oliver Alawuba, group managing director/CEO, UBA, stated.
According to him, UBA has a track record of structuring and participating in significant resource-based transactions, leveraging its global network and dollar balance sheet. “Similar transactions include DRC deal, Kenyan deal, Senegal SAR Orion deal with Afreximbank,” he disclosed.
Mele Kolo Kyari, group CEO, NNPCL, stated that the proceeds of the facility have been made available to the Federal Government (FG) as one of the strategies to improving macro-economic stability.
“The participation of global, international and regional syndication firms is a further testament to the lending market’s appetite for financing sponsored by NNPCL and signifies solid market confidence in Nigeria,” Kyari stated.
The initial participating lenders are Afreximbank, Africa’s multilateral trade finance institution, Gunvor International BV, a Geneva-based multinational energy and commodities trading company and Sahara Energy Resources Limited, an African-owned, leading international energy and infrastructure conglomerate.
Afreximbank’s extensive structuring and technical experience in arranging similar complex oil and gas financing facilities in Angola, Republic of Congo, South Sudan, Chad, Egypt, Cote d’Ivoire and Ghana, was brought to bear in the successful closure of the facility, notwithstanding the challenging market environment.
The bank acted as sole mandated lead arranger, technical and modelling bank, bookrunner, facility agent, offshore account bank, intercreditor agent and collateral agent.
