MTN Nigeria Communications PIc’s €100 Million Financing Round

Norton Rose also advised EIB.

The investment, which represents EIB’s largest ever financing for high-speed telecommunications in Africa, will be used to aid MTN’s expansion programme in bringing 4G coverage to Nigeria and expanding broadband access in line with its Ambition 2025 strategy. Over 74 million customers are expected to benefit from the expanded digital communications infrastructure, which is targeted at the Lagos and Ogun states.

“We are committed to leading digital solutions for Nigeria’s progress,” said Karl Toriola, CEO of MTN Nigeria. “This requires the continuous upgrade and expansion of our infrastructure to enable us to deliver superior service. The €100 million financing agreed with the EIB will accelerate 4G coverage, enhance network capacity and drive innovation that will benefit our customers.”

UUBO acted as Nigerian counsel to EIB with a team led by banking and finance partners Yinka Edu and Onyinye Okafor, together with senior associates Victor Samuel and Modupe Balogun, as well as associate Toluwalope Adedokun.

Lawyer Monthly had the pleasure to speak with Onyinye Okafor at Udo Udoma & Belo-Osagie to give us some further insight into this transaction:

Can you give us some more background information on this financing and UUBO’s role as legal counsel?

UUBO acted as Nigerian counsel alongside Norton Rose Fulbright (who acted as English counsel) to the European Investment Bank (EIB) (the ’lender’), in connection with its €100 million financing to MTN Nigeria Communications PLC (the ’borrower’ or ’MTNN‘). The loan is to be utilised by MTN to, among other objectives, expand the borrower’s 4G mobile broadband network in Nigeria. Our role included advising EIB on the transaction from a Nigerian law perspective and conducting a limited scope due diligence on the borrower. This required us to review the transaction documents and coordinate CPs, advise on tax issues and foreign exchange issues.

What are the key considerations to take into account when advising on a large financing round such as this?

In financing transactions generally, the commercial objective of the parties is a major factor in structuring the transaction and addressing any obstacles that may arise during it. This will also help to avoid long-winded negotiations. In some instances, in identifying these commercial objectives, parties’ objectives may be aligned, and in some instances, the objectives might not be aligned. Therefore, as a lawyer, understanding each party’s commercial objective would help in completing the transaction timely, overcoming obstacles and bottlenecks and significantly reducing negotiating time.

(a)          Foreign exchange liquidity is another key consideration in structuring large financing transactions in Nigeria. Exchange control exists in Nigeria and many of the borrowers generate revenue in Naira. Structuring transactions to deal with this currency mismatch and access to FX early on in transactions would ensure that foreign exchange risks and payment default risks are largely mitigated in transactions.

(b)          Other considerations include perfection requirements such as stamping and how parties plan to mitigate stamping costs. Stamping could create huge and unanticipated costs for the transactions, and since these sorts of costs are borne contractually by the borrower, it is important to consider how payment of stamping costs could be addressed in the transaction. Other factors to consider would include regulatory issues where the borrower is a regulated entity; tax exemptions that could apply in view of a lender’s status, or structuring transactions in a manner that ensures that they qualify for tax exemptions.

(c)           It is also important to keep in mind the disbursement/closing timeframe of the parties and to ensure that all corporate searches and due diligence are completed and conditions precedent documents or evidence are provided as early as possible so the transaction can reach financial close at the estimated timeline intended by the parties.

As a lawyer, understanding each party’s commercial objective would help in completing the transaction timely, overcoming obstacles and bottlenecks and significantly reducing negotiating time.

Were your team confronted with significant obstacles during their work on the financing round? If so, how did they overcome them?

Bottlenecks are typical in large transactions, especially where a lender is not familiar with the relevant jurisdiction. To mitigate such bottlenecks, it is important that the lawyers in the transaction inform the relevant parties about the peculiarities of the jurisdiction that could impact the transaction. Identifying these issues and discussing them with the parties will help address most obstacles that could cause delays or even truncate transactions. In relation to this transaction, some of these key considerations which I mentioned above were identified and addressed promptly and this helped overcome one or two obstacles that could have impacted the transaction significantly.

Why were your team’s skills and training a good fit for this work?

I would say that we have garnered a lot of experience advising on major transactions and have been involved in some major telecommunication financing, as well as transactions involving development finance institutions such as the lender. In summary, our experience spoke for us, and in the Nigerian market we are well known for our expertise in banking and finance. Our team is comprised of experienced and knowledgeable partners and associates who have been ranked globally and have advised on several cross-border transactions. We have also advised many leading banks, financial institutions and large corporates and multinationals.  Our experience and knowledge were brought to bear on this financing.

What will the successful completion of this financing round mean for MTN and telecommunications in Nigeria?

The successful completion of this financing round is expected to enhance MTN’s network infrastructure and contribute to its growth and provide better connectivity for the Nigerian telecommunications industry.

Do you have any other comments to make about this operation?

We thoroughly enjoyed working with EIB and MTNN on this transaction, as well as other local and foreign counsel, and we look forward to working on more transactions that would lead to growth in the telecommunications industry as well as in the overall Nigerian economy.