AFRIPOL.ORG IDEAS HAVE CONSEQUENCES
Nigeria to repay most its debt in Merrill Lynch deal - FT
Fri Mar 2, 2007
LONDON (Reuters) - Nigeria will redeem most of its remaining debt to the London Club of commercial creditors on Friday in a deal with U.S. investment bank Merrill Lynch, the Financial Times said, citing the country's finance minister.
The move would finally "free Nigeria from its historic debt overhang", Finance Minister Nenadi Usman told the newspaper.
"This provides Nigeria with a fresh start," she said.
The deal, to be signed in London, would transfer the obligation to pay creditors to Merrill Lynch through a $480-million payment to the bank, Usman said.
Nigeria owed $512 million worth of promissory note payments due in 2010.
But the country constructed a trade in which a bank would buy the debt at its best estimate of current and future value in an auction, which Merrill Lynch won, the FT reported.
Usman said she hoped the arrangement would encourage credit rating agencies to improve Nigeria's investment ratings and help the African state become a more "attractive destination for foreign investment".
Nigeria's efforts to free itself of London Club debt follow a landmark deal in 2005 under which Paris Club sovereign lenders granted the country $18 billion in debt relief.
In return, Nigeria used windfall oil revenues to pay back $12 billion in debts and arrears. That deal was concluded last year.
Usman told the FT that future Nigerian governments, however, would be unlikely to prioritise clearing debt in the same way as outgoing President Olusegun Obasanjo.
"Since he came in as president, he has paid a lot of attention to the debt issue," she said.
"Not everyone will have the same priorities. You may also understand that even though we do not want to encourage default, we cannot predict what will happen."
Nigeria had paid $1.486 billion to redeem par bonds as part of its efforts to rid itself of debts to the London Club, Obasanjo revealed earlier this week.
He also said an estimated $480 million would be needed to redeem the promissory notes and asked the Senate to add funding for that to a supplementary budget already under discussion.
London Club: Nigeria Settles $500m Promissory Notes Debt
• Saves $34m on transaction
From Kunle Aderinokun in Abuja, 03.04.2007
Nigeria at the weekend settled $500 million promissory notes debt, which constituted a part of about $2.4 billion owed to the London Club of creditors.
The country’s London Club debt stock comprised of three parts namely: Par Bonds valued at $1.486 billion and was paid last December; promissory notes worth about $500 million and 1.76 million units of oil warrants estimated at about $400 million.
Speaking weekend in London at the signing of agreements discharging Nigeria from all further payment obligations under the Central Bank of Nigeria Promissory Notes due 2010, Finance Minister, Mrs. Nenadi Usman said, with the conclusion of the promissory notes transaction arrangement, the only remaining component of the country’s London Club debt stock were the oil warrants.
She disclosed that, “we have initiated the process of redeeming these through a cash tender offer which was launched earlier this week” while encouraging holders of the oil warrants to fully participate and tender these warrants.
According to her, “we are providing a unique opportunity, at this historical juncture before we hold elections which will usher in a new administration, to address outstanding reconciliation issues and redeem these instruments.”
Usman enthused that, “by the time the present administration leaves office in May of this year, our aspiration is that Nigeria will be virtually free of London Club and Paris Club debts for the first time in living memory. The only debts that will remain would be those owed to multilateral institutions and a few bilateral loans, most of which have been contracted under very reasonable terms, and which, cumulatively, have been kept at sustainable levels.”
Usman disclosed that the nation has saved $34 million by transferring the liabilities arising from the payment of the $500 million promissory notes due to the London Club, from the Central Bank of Nigeria (CBN) to Merrill Lynch International Bank as Nigeria, which signaled the conclusion of the transaction.
She recalled that the promissory notes was restructured and handed over to Merrill Lynch, which would issue irrevocable letter of credit for Trustee for the notes and that the arrangement has discharged the CBN of the obligation to pay the installment under the notes.
“Under the arrangement agreed with the note holders, all remaining payments under the Promissory Notes will be sourced exclusively from amounts payable by Merrill Lynch International Bank under an irrevocable letter of credit issued in favor of the Trustee for the Notes. I should point out at this juncture that Merrill Lynch was selected following a competitive bidding process among three major Investment Banks.
“In return for procuring the issuance of that letter of credit, the Central Bank and the Republic of Nigeria shall receive a complete discharge and release of their obligation to pay the remaining installments due under the Notes”, she said.
Country Exits Promissory Note Component of London Debt
Nigeria First (Abuja)
March 5, 2007
Nigeria, on March 2 in London, signed an agreement to completely discharge it from the Central Bank of Nigeria (CBN) promissory notes due in 2010.
Based on the agreement, which saves Nigeria approximately N4.6 billion ($34 million), all the remaining payments under the promissory notes, worth almost N67 billion ($500 million), will be exclusively sourced from various amounts payable by Merrill Lynch, a global markets and investment banking group, under an irrevocable letter of credit issued in favour of the trustee of the notes.
It will be recalled that some years ago, Nigeria was on the list of most Heavily Indebted Poor Countries (HIPC) in the world.
In April 2006, Nigeria formally exited its over $30 billion liability to the Paris Club. On June 23, 2006, Nigeria's name was removed from the International Financial Task Force's (FATF) list of Non-Cooperating Countries and Territories. In August of the same year, Nigeria began re-empowering the local private sector through the settlement of her local debt obligations.
In November 2006, Nigeria prepaid approximately $1.5 billion of the outstanding Par Bonds components of the London Club debt. The promissory notes settlement is another component of the same debt.
Finance Minister, Mrs Nenadi Usman, Attorney General and Justice Minister, Chief Bayo Ojo, Central Bank of Nigeria (CBN) Deputy Governor (Operations), Dr. Shamusdeen Usman and the Director General, Debt Management Office (DMO), Dr. Mansur Muhtar, signed on behalf of the federal government while Alex von Sponeck of Merrill Lynch signed on behalf of the promissory note holders.
In her ardent comments on the event, Mrs Usman said that by the time President Obasanjo leaves office in May, "our aspiration is that Nigeria will be virtually free of London Club and Paris club debts for the first time in living memory. The only debts that will remain would be those owed multilateral institutions and a few bilateral loans, most of which have been contracted under very reasonable terms, and which, cumulatively, have been kept at sustainable levels."
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