Country ... Nigeria
Banking

Nigeria: Banking On Rencap, Citibank

COMMENTARY

Peter Burgess

Nigeria: Banking On Rencap, Citibank

The selection of Renaissance Capital and Citigroup as advisers to the three bridged banks in the country has again raised the prospect of early resolution of all issues pertaining to the bridge banks given the pedigree of the two international advisory firms, reports Festus Akanbi

After the initial delay over the choice of advisers for the three bridged banks, the Asset Management Company of Nigeria (AMCON) last week roared into action by unveiling the identities of the two advisory firms picked to value and advise on plans for the three affected banks. By AMCON's timetable, the advisers to the bridged banks- Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited- were supposed to have emerged in June. However, exactly one and a half months behind schedule, AMCON, which said 44 firms had submitted applications to work for the three banks, announced the appointment of two global financial services company- Citigroup Incorporated and Renaissance Capital- for the job.

According to AMCON's managing director, Mustafa Chike-Obi, Citigroup was picked to advise on Mainstreet Bank, while Rencap will be in charge of Keystone Bank and Enterprise Bank. They have three to six months to report back to AMCON, he said. The banks were among eight bailed out by the Central Bank of Nigeria (CBN) in 2009 as lending crisis threatened the financial system in Nigeria. While five were later acquired by other banks, three were bridged in August after regulators decided they couldn't meet banking requirements.

Till date, AMCON is yet to take a definite stand on what to do with the banks, as Chike-Obi insisted the corporation relies heavily on inputs from the advisers before it makes up its mind over a cocktail of options available for valuation and sale of the banks.

Renaissance Capital

Although, AMCON declined to release the list of the 44 firms that bidded for the job, sources said the choice of Renaissance Capital and Citigroup was informed by the sheer records of their performance on issues relating to mergers and acquisitions, and structured financing in Nigeria over a long period of time.

Renaissance Capital was founded in 1995 as a Moscow-based investment bank. It is part of Renaissance Group, a group of investment banking, asset management, and merchant banking and consumer finance companies. Renaissance Capital is a leading independent investment bank operating in Russia, the Commonwealth of Independent States (CIS), Central and Eastern Europe, Africa, Asia and other high-opportunity emerging and frontier markets. It also offers its clients access to these markets through the financial centres of London, Hong Kong and New York.

The firm is an established and trusted adviser to government, corporate and institutional clients in its core investment banking offerings: mergers and acquisitions, equity, debt, structured solutions and derivatives.

In 2008, Onexim Group acquired a 50% -1/2 share of Renaissance Capital. The Onexim Group is one of Russia's largest private investment funds, with focus on mining industry, innovative projects in energy and nanotechnology, real estate and other industries. Renaissance Capital is one of the leading M&A advisors to the emerging markets. The company specialises in providing advice to corporations and financial investors in relation to large and complex cross border transactions, mergers, acquisitions, restructuring, divestitures, 'take-private' deals, management buyouts, leveraged buyouts and other situations.

The company claimed that its M&A experts are embedded within its coverage teams around emerging markets, with local knowledge providing the most effective platform to serve its clients.

'Our Equity Capital Markets team, based in London, Moscow, Hong Kong and Johannesburg, assists clients with primary equity and equity-linked products, monetisations and structured solutions across emerging markets. This includes the management of syndication, structuring, marketing and distribution.

'We support IPOs, secondary offerings, privatisations, rights issues and convertible bonds, helping clients to communicate effectively with the markets in connection with their transactions. On exchanges from Toronto to Sydney, we offer the expertise and focus to take clients to virtually any market globally, whether in Africa or Mongolia,' the company said in a statement on its website.

It added: 'Our expert debt capital markets teams in Moscow and London manage debt capital-raisings for clients across emerging markets. We specialise in rouble-, dollar- and euro-denominated bonds, and provide advice and debt restructuring solutions for liability management, finance and hedging. This includes the provision of foreign-exchange hedging solutions in connection with our M&A and capital markets offerings.

'Our track record of raising clients' profiles and bringing them together with our world-class network of private, corporate and institutional investors, speaks for itself.'

For these feats, Renaissance Capital has a number of laurels in its kitty. These include the award of Best Equity House in Africa 2012 by Euromoney. Recognition also came for Rencap from The Banker Magazine where it was crowned as Equities Winner Africa for 2012 as well as M&A Winner for 2012.

Citibank Group

Citibank Nigeria has a 28-year commitment to Nigeria with more than $200 million invested and more than 300 professionals throughout the country. Information made available to THISDAY last week showed that Citibank has significant expertise in Nigeria in both advisory and financing transactions and has led or been involved in many of the important transactions in the market. Perhaps, one of the good points that paved the way for the emergence of the bank is the fact that its operation in Nigeria, which began in 1984, predated those of the top Nigerian-owned banks: GTBank (1991), Zenith (1990) and those of other foreign-owned banks: Standard Chartered (1999) and Stanbic (1992),

To its credit, the bank has led several landmark financings in Nigeria including Access Bank Eurobond ($350 million, 2012), Etisalat ($650 million, 2011), Nigeria debut Eurobond ($500 million, 2011), MTN ($2.1 billion, 2010) and Celtel ($1.4 billion, 2007) among others.

It is also on record that Citibank has advised on or led transactions worth over $15 billion for international and local corporate and government entities.

Sources close to AMCON also told THISDAY that Citibank was picked because of its extensive understanding of Nigeria's capital markets through its on-the-ground corporate finance, investment banking and custody teams. The sources also pointed out that a number of past and present Nigerian bank CEOs began their careers at Citibank while several Citi alumnus are currently executive directors at various Nigerian banks which aids the bank's syndication process.

One of the factors that also worked for the bank, according to sources, is the fact that Citi Nigeria's Country Treasurer is the current President of the Financial Markets Dealers Association (FMDA). With almost 300 employees and 13 branches across the country, Citi Nigeria continues to develop innovative products and services for its customers in and around strategic locations.

In terms of recognition, Citibank cannot be found wanting. For instance, the bank was in 2010 named Best Bank for Risk Management and Best Overall Bank for Cash Management by Global Finance.

Choice of Advisers

AMCON said in a March advertisement that it was seeking advisers for the possible sale of the three banks. In June, Chike-Obi said 44 had responded and that the agency shortlisted 11 of them to submit proposals. While the central bank is not directly involved in the sale of the banks, the Central Bank Governor, Sanusi Lamido Sanusi, said on February 15 that it's 'expecting a smooth process.'

'In the proposal, we will specify what we want them to do and they will give out their fees. But this is going to take a while and will be very transparent,' Sanusi had said.

Chike-Obi pointed out that the corporation would get the best return, adding that the whole process would be done in the best interest of the financial sector.

The AMCON boss added that the corporation needed the advisers to know the present worth of the banks.

Options

Speaking about the various options available for the recapitalisation of the three banks, Chike-Obi said listing the banks' shares on the Nigerian Stock Exchange may be a possibility. 'If they advise a share sale then we will go ahead,' he said.

He said: 'Selling a bank is a serious matter. We don't know what the banks are worth today. We need experts to go into the banks and value what their current worth is. For us to say this is how much we are selling this, we need to know the value.

'Also, we need the experts to go into the banks to tell us the best options open to us. From there, we will come up with our plans. Selling a bank is not like selling a piece of corn, it's a complicated process. So yes, we will get advisers, look at different options available to us and come up with plans. People should be patient.'

Also speaking on the options being pursued by the corporation for the banks, he said: 'One of the options available to AMCON is to take these institutions public, so that the Nigerian public can have a chance to invest in them. So, we want to look at all the options before we start thinking of who the ultimate investors would be. It is only on the basis of that advice and examination that we will come to the best way of selling these banks.'

He disclosed that over 20 different bodies - banks and other investors - had expressed interest in the three bridged banks. 'We have not got to the stage when we can consider those expressions of interest yet. The process to get there requires AMCON appointing an adviser that will evaluate and determine the value of the banks, and evaluate all the options available to AMCON,' he said.