Trade Alert - November 2017, Issue 47


Despite fluctuating oil prices and uncertainty in the Naira, Nigeria remains Africa’s largest economy. The sub-Saharan African country, together with South Africa, accounts for almost half of the region’s GDP.

Bloomberg reported this month that “Investors haven’t pumped this much hot money into Nigeria in three years” with debt traders mostly buying short-term securities, attracted by yields of almost 20%.

The continued recovery of the Nigerian economy can be attributed to a stronger oil market, assisted in part by the country not being subject to the OPEC output cuts.

Crude oil prices have increased 39% since June 2017 to over USD 60 a barrel and production in Nigeria has risen 15% during 2017 to 1.7mn barrels per day. As a result foreign reserves are at USD 34bn, the highest in 3 years.

Portfolio investment in Q3 more than tripled compared to 2016 to USD 2.8bn, according to Nigeria’s National Bureau of Statistics.

However, investors have voiced concerns that a fall in crude oil prices or the re-commencing of the bombing of export terminals by militant groups could push Nigeria’s current account back into deficit. According to a Bloomberg report on 5 November 2017, Nigerian officials are confident that the naira’s decline is at an end but traders are not yet convinced.

On 10 November 2017, Moody’s downgraded 8 Nigerian banks[1] citing its reasoning as “(1) the government's reduced capacity to provide support to Nigerian banks in times of stress and (2) the banks' significant holdings of government securities linking their credit profiles to that of the government”.

On 15 November 2017, President Muhammadu Buhari’s government received legislative approval to raise USD 5.5bn of external borrowing, USD 2.5bn of which would be used to implement capital projects and the remaining USD 3bn of the loan would be used to service domestic debts.

Then on 20 November 2017, the government announced that it had raised USD 3bn under its USD 4.5bn Global Medium Term Note programme (comprising a USD 1.5 bn 10-year series and a USD 1.5bn 30-year series). Debtwire has reported that the government will refinance the existing USD 3bn of debt using a portfolio restructure that will not increase the public debt burden. However, according to an IMF report debt servicing costs absorb more than 60% of government revenues.

An improving economic and political backdrop has tempted foreign investors to return to Nigeria once again, with the country’s stock market rallying 19% in dollar terms and 36% in local currency terms so far this year.

This alert describes some of the issues to be aware of when acquiring loans on the secondary market made to a borrower resident in Nigeria.


Notwithstanding Nigeria’s recent oil driven recovery, analysts continue to express significant concerns regarding the management and recognition of non-performing loans (“NPLs”) in the country’s banking sector. According to the Nigeria Deposit Insurance Corporation (“NDIC”), the level of non-performing loans in Nigerian banks rose by 50%, from 1.639 trillion Naira (“NGN”) in December 2016 to NGN 2.42 trillion as at September 2017.

In an effort to address this issue, the Central Bank of Nigeria (“CBN”) has recently proposed introducing further regulatory measures to enable certain qualifying and privately owned institutions to acquire NPLs.  In June 2017, the Central Bank published an “Exposure Draft” of the Framework for Licensing , Regulation and Supervision of the Business of Private Asset Management Companies in Nigeria (the “Draft Framework”). The Draft Framework acknowledges that the current Asset Management Corporation of Nigeria (AMCON) – which was set up to manage toxic assets in the wake of the financial crisis – is insufficient for the purpose of addressing the problems created by “the decline in international commodity prices” and the consequent effect this had on “risk assets”. According to the Central Bank, it has now “become expedient to proactively widen the space for the management of non-performing loans through the establishment of Private Asset Management Companies (“PAMCs”)”.

The Draft Framework provides that PAMCs can be owned by individuals, corporations or foreigners, and will be permitted to acquire performing loans and Eligible Assets[2] from Nigerian banks, Other Financial Institutions[3], other PAMCs and the NDIC. For a prospective PAMC to commence business in Nigeria, it will need to obtain a license from the Central Bank.

Click here to read the full article from Bloomfield Law regarding the Draft Framework.


As a general rule, Section 22 (4) of the Stamp Duties Act Cap. S8 LFN 2004 provides that any instrument that is executed in Nigeria or relating to Nigeria (regardless of its place of execution) or to any property situate or any matter or thing done or to be done in Nigeria is required to be stamped.

Stamp duty payable on unsecured loan agreements at an ad valorem rate of 0.125% of the amount of a loan, and at an ad valorem rate on instruments creating registrable charges (for example, a rate of 0.375% would apply to a legal mortgage or a debenture deed).

There are various methods used to minimise the prohibitive stamp duties, including: (i) parties to a loan may agree to ‘under-stamp’ the security documents, which means they will only be stamped for a part of the value of the loan. The lenders will only be secured to the value of the stamp duty paid, but the lenders may opt to ‘upstamp’ to the full loan amount at a later date; and (ii) unsecured loans or where security does not require registration may be executed offshore. It will only be necessary to bring the agreement into Nigeria to enforce, in which case the stamp duty obligation will arise within 30 days thereof.

For a transfer of a loan, the transfer document will require stamping at a nominal rate of NGN 500.00 for each original and NGN 50.00 for each counterpart.


Foreign investors do not need a license for the purchase or sale of loans made to a Nigerian corporate borrower, provided that they is not deemed to be “carrying on business” in Nigeria.

Lending by a foreign investor that is deemed to be carrying on business may trigger Nigerian lending licensing requirements. There is no legislative guidance on the meaning on carrying on business, but in Edicomsa International Inc. v. CITEC International Estates Ltd (2006) 2 CLRN 139, the Court of Appeal defined the phrase as “to conduct, prosecute or continue a particular vocation or business as a continuous operation or permanent occupation. The repetition of acts may be sufficient. It also means to hold oneself out to others as engaged in the selling of goods and services”.

Foreign investors seeking to obtain a license to lend to Nigerian borrowers would first need to incorporate a company in Nigeria, apply for a business permit and register with the Nigerian Investment Promotion Commission. They would then apply in writing to the Governor of the CBN providing extensive information in support of the application as well as a non-refundable application fee of NGN 500,000 (circa USD 1,633.98) and deposit of the applicable minimum capital with CBN, as follows:

  • Regional commercial banking license: NGN 10,000,000,000 (circa USD 32,679,738) or other prescribed amount
  • National commercial banking license: NGN 25,000,000,000 (circa USD 816,993) or other prescribed amount
  • International commercial banking license: NGN 50,000,000,000 (circa USD 163,398,693) or other prescribed amount
  • Merchant banking license: NGN 15,000,000,000 (circa USD 490,196,078) or other prescribed amount

If all the requirements are met, the CBN Governor may issue a license with or without conditions. The CBN Governor may also refuse to issue a license without the need to give any reason. Banks and Other Financial Institutions Act 1991 (as amended) (“BOFIA”) is silent on the timing and basis for the decision to grant a banking license.

A domestic lender that is engaged in banking business, which includes receiving deposits on current accounts, savings accounts or other similar account, paying or collecting cheques drawn by or paid in by customers, must be duly incorporated in Nigeria and hold a valid banking license issued under BOFIA. Where the domestic lender is a moneylender, a moneylender license (and not a banking license) under the Moneylenders Law of the relevant state of operation would apply.


Under Nigerian law, the trust concept is recognised by local courts and security agents/trustees are widely used in contractual arrangements and commercial lending transactions.

There are certain benefits to ensuring that security is held on trust by a Nigerian entity, including:

  • Pursuant to No. Section 526 of the Company and Allied Matters Act Cap. C20 LFN 2004, on the insolvency of a security trustee all property and rights vested in or in trust for the security trustee shall be deemed to be vested in the State, with the exception of property held by the company on trust for any other person.
  • The Land Use Act vests all the land in the territory of a state in the governor of that state and accordingly the Nigerian courts have held that foreign entities cannot hold an interest in land in Nigeria. As such, a security package comprising real property will generally be granted in favour of a Nigerian financial institution that provides trustee services for syndicated loan transactions in its ordinary course of business.
  • Assignment of insurance and reinsurance policies to non-Nigerian entities is prohibited. Again, it is possible to circumvent this issue by appointing a Nigerian security trustee to hold the security interests.


The main methods of loan transfer in Nigeria, similarly to transfers pursuant to the laws of England and Wales, are: (i) assignment; and (ii) novation.

A transfer by novation extinguishes all rights and obligations of an existing lender and substitutes them with new rights and obligations of the new lender. This will typically have the effect of releasing any guarantee or security given in respect of the original contract and will require entering into a new security document. However, this is avoided if the security is held by a security trustee and not the lender for itself.

A transfer by assignment transfers the rights (but not obligations) of an existing lender (including the right to receive interest and the right to repayment) to the new lender.

Participation agreements may be used in Nigeria, but are not common. A participation occurs where the existing lender remains lender of record. No actual loan transfer takes place. However, the lender procures the participation of other lenders to share in the risks and profits of the loan.


Pursuant to Section 9(1) (c) of the Companies Income Tax Act (“CITA”) Cap. C21 LFN 2004, any lender that derives interest income from Nigeria is liable to pay tax on that income. Section 9(2) of CITA provides that interest shall be deemed to be derived from Nigeria if(a) there is a liability to payment of the interest in Nigeria regardless of where or in what form the payment is made or (b) the interest accrues to a foreign company or person from a Nigerian company or a company in Nigeria regardless of whichever way the interest may have accrued”.

There are certain exemptions in respect of income tax on loans from foreign lenders, depending on the terms of the loan, as below:

Repayment Period (including moratorium)

Moratorium on repayments of principal and interest


Above 7 years

Not less than 2 years


5-7 years

Not less than 18 months


2-4 years

Not less than 12 months


Less than 2 years



Section 78 of CITA requires a borrower paying interest to a lender to withold tax at the rate of 10% (or at the rate of 7.5% where the lender is located in a country that has executed a Double Taxation Agreement with Nigeria). The tax withheld is the final tax for a non-resident lender on the interest income.


Security documents should be perfected in accordance with Nigerian laws, as follows:

  • Where a new lender is required to take the benefit of existing security by entering into a supplemental security document or a deed of variation, this will be stamped at the stamp duties office and filed at the Corporate Affairs Commission (“CAC”) (the Nigerian Companies Registry). The supplemental security document will amend the principal security document by including the new lender pursuant to the amendment clause of the facility agreement.
  • Title to real property can only be held by a Nigerian entity or individual and as such generally a security package comprising real property will be granted in favour of a Nigerian financial institution whose ordinary course of business is to provide trustee services for syndicated loan transactions. The consent of the Governor of the state where the land is situated or in the case of federal government land, the consent of the Minster in charge of Land, Housing and Urban Development, will be required.

Special Note

With special thanks to Adedoyin Afun at Bloomfield Law, who assisted us with this Trade Alert.


Shelley Kay Associate, London
+44 207 170 8664

Shelley Kay is an associate in the Financial Restructuring Group in Cadwalader's London office.

Shelley specialises in distressed debt and claims trading. She represents investment funds, brokerage firms, hedge funds and other financial institutions in connection with the acquisition and sale of syndicated bank loans, debt instruments, bond claims and distressed assets, in particular insolvency claims within Europe, the United States and Asia.

George Pelling Associate, London
+44 207 170 8569

George Pelling is an associate in the Financial Restructuring Group and the Debt and Claims Trading Practice in Cadwalader's London office. George advises on distressed debt investing and claims trading and has significant experience in international finance transactions.


(“BES”) in liquidation

Filing Deadline: 11 December 2017

Should you require any assistance with filing claims, please contact George Pelling.



Altice N.V., the owner of France's SFR mobile network, has over EUR 50 billion of net debt. Following the poor results of the SFR division published in the company’s Q3 2017 results, the company saw the price of its shares fall by almost half. Patrick Drahi, Altice’s founder and ultimate owner via his company Next Alt S.à r.l. (“Next Alt”), which reportedly holds 59.93% of the share capital of the company, has reinstated himself as chairman.

In response to “market speculation and misinformation” the company released a statement on 20 November 2017 which attempted to reassure investors. In particular, the company confirmed that:

  1. it was not preparing for a cash raising by means of any equity or equity-linked issuance;
  2. Next Alt did not have any margin loan exposure to Altice and had not sold any material number of shares since the company’s IPO;
  3. management had not taken any active decision to sell Altice shares;
  4. the company had clear plans to de-lever its balance sheet through the disposal of non-core assets; and
  5. the company had no margin loan exposure with respect to its ownership in Altice USA.In conjunction with its plans to de-lever and dispose of the non-core assets, the group is reportedly planning to sell its telecom network in the Dominican Republic.
  6. In addition, Altice confirmed that liquidity of the group was strong with approximately EUR 1.66bn of cash on balance sheet (including EUR 0.4bn at corporate level) as of the end of Q3 2017 and approximately EUR 3.5bn of undrawn and available revolving facilities with an average maturity of 3.9 years.

In addition to the proposed sale of its telecom network, Debtwire reports that Altice is in discussions with Artemis (the investment vehicle controlled by the Pinault family) regarding the sale of “Point de Vue” weekly magazine. The magazine has been valued in the region of EUR 15m.


On 9 November 2017, the UK High Court delivered its judgment with respect to the application made by Ante Ramljak, Extraordinary Commissioner of Agrokor d.d., to have the extraordinary administration proceedings recognised under the Cross-Border Insolvency Regulations 2006 (the “CBIR”).

Sberbank, Agrokor’s largest creditor, had challenged the application on the following grounds: (i) the extraordinary administration is not a “foreign proceeding” within the meaning of Article 2(i) of Schedule 1 to the CBIR; and (ii) even if the extraordinary administration proceedings do constitute a “foreign proceeding”, to recognise it would be “manifestly contrary to English legal public policy", on the basis that the legislation is “contrary to fundamental principles designed to ensure a fair insolvency proceeding”.

His Honour Judge Paul Matthews rejected these arguments and found in favour of Argokor on all counts.

A copy of the judgement is available here.


Minority shareholders in a number of Agrokor’s subsidiaries have formed an association named “Udruga manjinskih dioničara koncerna Agrokor” or The Association of Minority Shareholders of the Agrokor Concern. Reorg Research reports that the primary goal of the minority shareholders’ group is to dispute guarantees that Agrokor companies gave to Agrokor d.d. as the parent company – the group claim that such guarantees were illegal.

Pursuant to Croatia’s Companies Act, if a transfer involves property representing more than a quarter of a company’s base capital, such transfer needs to be confirmed by a 75% majority at a shareholders’ assembly. The minority shareholders’ group claims that such meeting was not called to consult the equity owners and instead guarantees were given to Agrokor d.d. by their management boards and supervisory boards only.

The guarantees given amount to EUR 12bn (HRK 90bn). The association warns that the court would have to dismiss the final settlement between creditors if these guarantees were a part of it.


Debtwire reports that Portuguese bank Novo Banco has announced its results for the first time in nine months. The bank reported a negative income before tax of EUR 355.6m for the period up to September 2017, this reflects an improvement of 34.7% over the same period in 2016. Conversely, the bank’s decision not to include additional deferred taxes in its results led to a negative net income of EUR 419.2m, which is almost 10% greater than the previous year.

During the nine month period Novo Banco reduced its loan book by EUR 2.1bn – in particular, the bank reduced its NPL portfolio to EUR 1.6bn from a total loan portfolio of EUR 2.1bn. The bank’s NPLs represented 31.5% of the bank’s total credit portfolio compared to 34.3% in September 2016. Portuguese authorities aim to speed up the reduction of negative assets and are creating a platform to scale down the national bank’s NPLs.

On 4 October 2017, Novo Banco successfully undertook a Liability Management Exercise (“LME”) with no equity dilution. On 18 October 2017 Nani Holdings subscribed for a EUR 750m capital increase, which will be increased by a further EUR 250m until the end of 2017. Nani Holding currently holds 75% of the share capital, with the Resolution Fund holding the remaining 25%.

As of 18 October 2017 Novo Banco’s status as a bridge bank was withdrawn.

  • DANA GAS PJSC LOSES UK COURT BATTLEThe case involved questions as to the validity of an amended and restated UAE law governed mudarabah agreement, a separate (UAE law governed) sale agreement and an English law governed Purchase Undertaking. Dana Gas challenged the validity and enforceability of the trustee’s rights under the Purchase Undertaking to oblige it to pay the “Exercise Fee” thereunder. Dana Gas has publically confirmed its intention to appeal the High Court’s decision. 
    1. The full judgment is available here.
    2. In his judgment, the Judge held that even on the assumption that the UAE governed documents were unenforceable as a matter of UAE law, English law would determine whether the Purchase Undertaking would be valid and enforceable. The Judge found that the Purchase Undertaking was valid and enforceable on its own terms. In particular, it was noted that it was not by accident that the Purchase Undertaking was structured to protect holders of the Sukuk from the “risk that the mudarabah and the transaction documents governed by UAE law [might] turn out to be invalid”.
    3. Dana Gas PJSC (“Dana Gas”), the Sharjah, United Arab Emirates-based energy producer, has lost its UK court battle against holders of its USD 700m Islamic bond, who included international investors Goldman Sachs and BlackRock. Mr. Justice Leggatt concluded that the grounds upon which Dana Gas brought its claim were “unfounded” and “totally without merit”.

The Financial Times reports that property investor Vincent Tchenguiz has settled a GBP 2.2bn lawsuit against, inter alios, Icelandic bank Kaupthing, which was linked to a mishandled investigation by the UK Serious Fraud Office (the “SFO”). Tchenguiz withdrew his claims against the bank’s winding up committee, accountancy firm Grant Thornton and two of the firm’s partners, and was ordered by the courts to pay Grant Thornton’s costs.

Despite settling this claim, the property investor stands to benefit from a loan write-off of GBP 100m and Kaupthing is said to be returning assets given as collateral by the Tchenguiz family trust against some of the bank’s loans. 

This settlement is the latest in a string of ongoing disputes over the failure of Kaupthing. In 2014, at the height of the Icelandic banking crisis, Vincent Tchenguiz settled a GBP 300m damages claim against the SFO for GBP 3m.


LEHMAN “WATERFALL II – Parts A & B” Applications for Permission to Appeal

Following the Court of Appeals Judgment on 24 October 2017, in respect of the appeals of various issues across Waterfall II Parts A & B, an Order refusing all applications for permission to appeal to the Supreme Court was passed on 6 November 2017. Parties must now apply directly to the Supreme Court should they wish to appeal the issues.  

Subsequently, the parties have filed the following Notices of Appeal seeking permission to appeal to the Supreme Court:

  • Wentworth’s Notice dated 20 November 2017 is available here;
  • the Senior Creditor Group’s Notice dated 21 November 2017 is available here; and
  • York’s Notice dated 21 November 2017 is available here.KEY TAX MEASURES
  • UK BUDGET 2017 –


The Chancellor of the Exchequer delivered the UK Budget for 2017 on 22 November 2017.

As previously announced, the UK Government intends to exempt debt issued on a multilateral trading facility (“MTF”) operated by a European Area-regulated recognised stock exchange from the obligation to withhold on account of UK income tax.

Click here to read our Client and Friends Memorandum on the key tax measures in this year’s budget.

[1]     Downgraded to B2 from B1:-- Access Bank Plc (Access), Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA) and Zenith Bank Plc (Zenith) and the long-term local and foreign currency issuer ratings of Bank of Industry, a Nigerian development bank. Downgraded to B3 from B2 the long-term foreign currency deposit ratings of Access, GTBank, UBA and Zenith, as well as those of Union Bank of Nigeria plc (Union), First Bank of Nigeria Limited (FBN) and Sterling Bank Plc (Sterling). Concurrently, Moody's downgraded the baseline credit assessments (BCAs) of Zenith and GTBank to B2 from B1.

[2]     Eligible Assets under the Draft Guideline include secured or unsecured non-performing loans of Nigerian banks and Other Financial Institutions (OFIs) and any other assets designated from time to time.

[3]     According BOFIA, “Other Financial Institutions” means “any individual, body, association or group of persons; whether corporate or unincorporated, other than the banks licensed under this Act which carries on the business of a discount house finance company and money brokerage and whose principal object include factoring, project financing, equipment leasing, debt administration, fund management, private ledger services, investment management, local purchases order financing, export financing, project consultancy, financial consultancy, pension fund management and such other business as the bank may, from time to time, designate.”

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