Ecobank Nigeria has successfully secured the approval of its noteholders to amend key provisions tied to its $300 million Senior Note Participation Notes due in 2026, following the severe impact of the Naira’s devaluation on its capital adequacy ratio.
The approval was announced after a meeting held on September 16, 2024, during which noteholders passed an extraordinary resolution to temporarily suspend capital adequacy requirements, providing Ecobank with much-needed financial flexibility.
The amendments are aimed at helping the bank recover from the substantial impact of the Naira’s depreciation, which has seen the currency fall from N951.79 to the U.S. dollar at the start of 2024 to N1,628.47 by the end of July 2024.
According to the statement issued on September 17, 2024, noteholders of Ecobank Nigeria’s $300 million Senior Note Participation Notes unanimously approved the proposed amendments.
As part of the resolution, noteholders also granted a waiver for any potential or actual default events that may have occurred as a result of the bank’s failure to meet its capital adequacy requirements prior to the approval.
This ensures that Ecobank is shielded from legal or financial repercussions related to breaches of its covenants during this period of financial distress.
In return for their approval, noteholders who voted in favor of the resolution will receive consent fees.
The settlement of these fees is expected to occur on or around September 19, 2024, according to the terms outlined in the Consent Solicitation Memorandum.
Ecobank Nigeria’s capital remediation plan, which has been approved by the CBN, involves a series of measures aimed at restoring the bank’s financial health and meeting the new regulatory capital requirements by April 2026. Key steps include:
These measures are expected to elevate the bank’s capital adequacy ratio to 20.36% on a pro forma basis by June 30, 2024, significantly above the minimum regulatory requirement.
Market and Sector-Wide Implications
The approval of the resolution by noteholders comes at a critical time for Nigeria’s banking sector, which has been grappling with the broader macroeconomic fallout of the Naira’s sharp depreciation.
Note: This story was updated to reflect new information.