â€¢ How Unity Bank signed $1bn investment deal with Milost
By Ndubuisi Francis in Abuja and Obinna Chima in Lagos
Following the recent assumption of duty of the two new deputy governors of the Central Bank of Nigeria (CBN), the governor, Mr. Godwin Emefiele has approved the redeployment of Dr. Okwu Joseph Nnanna, from the Financial System Stability (FSS) Directorate to that of Economic Policy Directorate.
A statement yesterday by CBN spokesman Mr. Isaac Okorafor disclosed that the governor equally approved the deployment of Mrs. Aishah Ahmad in the Financial System Stability (FSS) Directorate, while Mr. Edward Lemetek Adamu has been assigned the portfolio of Deputy Governor, Corporate Services.
Mr. Adebayo Adelabu will retain his portfolio as Deputy Governor, Operations Directorate.
The statement said all the affected principal officers have since assumed duty in their new offices.
The statement added that Emefiele has emerged The GuardianEconomic Personality of the Year (2017) in recognition of his contributions to stabilising the Nigerian financial sector during the recession as well as the Bankâ€™s effort in development financing.
Presenting the award to Emefiele at a ceremony held at the Eko Hotels and Suites, Victoria Island, Lagos, the President and Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, commended him and his team at the CBN for their efforts at managing the Nigerian financial sector and intervening in critical sectors of the economy, particularly agriculture.
In his acceptance speech, Emefiele expressed appreciation to The Guardian for selecting him for the award and commended the outfit for its foresight and thoughtfulness at publishing the report on â€œFinancing the Economyâ€.
The CBN governor noted that the exposure of the Nigerian economy to global shocks was a reflection of the fact that Nigeria as a country was unable to sufficiently produce what its people consume, hence the huge dependence on foreign goods.
He attributed the inability of the country to sufficiently produce what it consumes to heavy dependence on the oil sector to provide the foreign exchange needed to finance the countryâ€™s imports, poor diversification of the economy, and low factor productivity in key non-oil sector.
He also identified the ostentatious and elitist taste for imported goods in Nigeria and inadequate funding to strategic high impact and high employment multiplier sectors as major challenges facing the economy.
While noting that the level of credit in the domestic economy channelled to the productive private sector was critically below the levels required to place the Nigerian economy on the path of balanced, sustainable, and inclusive growth, Emefiele however assured that the CBN and the banks would continue to be catalysts to development in Nigeria, particularly as it concerns the vulnerable and needy in the society.
According to him, following a joint initiative by the banks in 2016, each bank contributed five per cent of its profit after tax to support the development initiatives of the government.
He added that the contributions to the fund were nearing the N60 billion mark, adding that the CBN and the deposit money banks had concluded plans to unfold the disbursement criteria for the fund to the vulnerable sectors in Nigeria, which he said needed access to credit.
On the efforts by the central bank at countering the adverse effects of the global shocks, he said the CBN embarked on a number of short-term and long-term policies such as a cycle of monetary tightening to rein in inflation, and external reserves management through the restriction of foreign exchange for imports of goods that can be produced in Nigeria.
He said the CBN also established a decisive withdrawal of the â€œde factoâ€ subsidy for the importation of 41 non-essential commodities with unfolding successes, introduced various policies to eliminate FX speculators, bettors, round-trippers and rent-seekers, and thereby stabilised the exchange rate with the establishment of the Investors-Exporters Window, among others.
Reeling off other achievements of the CBN, Emefiele said the sum of 393.5 billion had been released to 478 large scale agricultural projects since the inception of the Anchor Borrowersâ€™ Scheme in 2010, even as the Bank was poised to disburse up to 400 billion at only 9.0 per cent interest rate under the Real Sector Support Facility (RSSF), adding that the strategic initiative was targeted at projects in manufacturing and agriculture, given the mutual interdependence of both sectors for the complete industrialisation of agro-allied business.
Unity Bank, Milost Deal
Meanwhile, more information has come to light on how Unity Bank Plc entered into an agreement with Milost Global Inc., a New York-based private equity firm, to support the recapitalisation of the Nigerian bank to the tune of $1 billion.
The agreement, which was premised on the execution of a non-binding term sheet, was terminated about a fortnight ago.
The Securities and Exchange Commission (SEC) at the weekend said it was still investigating the matter and would come out with a position after the exercise.
The bank had in a recent statement to the Nigerian Stock Exchange (NSE) explained that the term sheet agreement was for discussion purpose only.
But two separate documents obtained by THISDAY that were signed by representatives of both parties defined the terms of the agreement.
For instance, under the â€œPre-IPO Term Sheet Agreementâ€ that was jointly signed by the erstwhile chairman of the bank, Mr. Thomas Etuh and Mr. Bernard Yew for Milost, dated September 4, 2017, the investment in the bank was to be made in the form of a Milost Equity Subscription Agreement (MESA).
The MESA, subject to certain restrictions, could be drawn down at the companyâ€™s (Unity Bank) option, with the company issuing shares to the investor in return for funds. â€œThe company controls the timing of any draw down,â€ said the MESA.
The funds were to be utilised for the recapitalisation and growth of Unity Bank.
Under the terms of of draw down, the agreement stated: â€œAt any time, the company may, in its sole discretion, issue a â€˜Draw Down Noticeâ€™ and at no time shall the equity tranche exceed $20,000,000 and the Note tranches exceed $10,000,000.â€
Also, the parties agreed that it was in their â€œcommon interest that the price of the shares in the company stays at a high level. For this reason, the investor will not engage in any practice, such as short selling, that could have a negative impact on the share priceâ€.
The document added: â€œThis MESA is the only share subscription (defined as an issue of shares to financial investors structured over time with each tranche and draw down made at the discretion of the company, which the company is currently negotiating.
â€œThe company agrees not to enter into a new share subscription facility agreement with any other investor other than Milost Global Inc. from the date of the MESA term sheet until the close of documentation for MESA.â€
Also, a separate document titled: â€œRe: Commitment Letterâ€, dated November 14, 2017, was signed by Ms. Tomi Somefun and Shehu Mohammed, the bank CEO and company secretary respectively, as well as Bernard Yaw and Darlene Audler, president and company secretary for Milost.
It explained that Milost offered to invest up to $1 billion â€œTotal Commitment Amountâ€ in Unity Bank and it â€œintended listed holding company in the U.S.-recognised stock exchange divided as follows: up to $700,000,000Â (the total equity component) in draw downs of common shares of the company and $300,000,000 (the total note component) in convertible note draw downs, structured as MESAâ€.
All the equity and convertible notes amounts were to be in U.S. dollars.
The document, however, stressed that the agreement was subject to the satisfactory completion of financial, regulatory and technical due diligence and approval from the investment committee, board of directors from both investor and Unity Bank, and the execution of MESA entered into between the Nigerian bank and Milost Global Inc., as the new investor.
In terms of the convertible note, the document, among other terms, stated: â€œIt shall mean unsecured convertible notes bearing simple interest (no compounding of interest) at five per centÂ per annum, with interest payable quarterly in arears in cash, a maturity date of five years from the date of issuance, and which principal amount shall be convertible into common shares with a conversion price per common share equal to the premium price at the date of issuance of the convertible notes.
â€œThe payment of the purchase price and issuance of the convertible notes to the investor of each equity and notes draw downs will occur on such date that is no later than 10 business days from the date of a draw down notice, unless otherwise agreed to by the company and investor.
â€œThe conversion price of a notes draw down will be calculated at the 5-day volume weighted average price on the business day immediately preceding the draw down notice, plus a 200 per cent premium on each note draw down notice.â€
The bank was expected to pay Milost a â€œcommitment feeâ€ in connection with each draw down under the following terms: â€œA commitment fee of five per cent of the total equity component in free trading common shares 10 business days upon receipt by the company of the initial equity draw down amount from the bank account of the company.
â€œA commitment fee of five per cent of the amount of each note draw down is payable to investor in cash upon receipt by the company of such note draw down amount from the bank account of the company.â€
Milost had alleged that soon after the information on the agreement was made public, it started receiving threatening emails from someone who said he was politically connected to the powers that could shut Milost out of Nigeria if it did not terminate the Unity Bank transaction.