The Dangote Group, grappling with liquidity concern, is considering the sale of a 12.5 percent stake in its newly commissioned refinery, Global rating agency, Fitch Rating reports.
A 7.25 percent stake in refinery project entity of the largest conglomerate in Africa, was acquired for $1.0bn by the Nigerian National Petroleum Corporation (NNPC) acquired in 2021, with an option to purchase the remaining 12.75 percent stake by June 2024.
“Since the option has not been exercised, the group plans to divest a 12.75% stake in DORC in 2024,” Fitch Ratings said in its latest note.
According to Fitch, “The group intends to service its significant syndicated loan maturing in August 2024 from the equity divestment. However, timely divestment and meeting the imminent maturity is highly uncertain in our view.
“Further delays in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to further rating downgrade.”
The rating agency explained that the company’s oil refinery operated at about 50 percent capacity in the first half of the year, at 325,000-375,000 bpd, while Dangote’s fertiliser business was hindered by inadequate gas supply.
Fintech stated further, “The EBITDA contribution from the refinery has been far below our previous projection as the facility is ramping up and optimizing production.
“We expect gradual improvement in EBITDA contribution from DORC going forward following the initiation of gasoline production in Q3 this year.
“The debt structure also includes an on-demand shareholder loans from its ultimate parent Greenview plc, amounting to $2.3 billion representing 43 percent of total debt.
“We view the shareholder loans as subordinated debt. The company has also raised senior unsecured debt amounting to N350 billion with long-dated maturities in 2029 and 2032 to finance capex requirements.”
More so, Aliko Dangote, the founder of Dangote Group revealed two months ago that he has paid off $2.4bn of the $5.5bn loan for his $19bn Lagos-based refinery.
He stated that the money was borrowed “based on our own balance sheet. I think we borrowed just over $5.5bn. But we also paid a lot of interest as we went along, because the project was delayed because of a lack of land, also the sand-filling took a long time. Almost five years or so we didn’t do anything.
“We actually started in 2018. We borrowed that much. We have, of course, paid interest and some principal, about $2.4bn. We’ve done very well. We now have only about $2.7bn left to be paid. So we’ve done very well for a project of that magnitude.”
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