Milost Global Inc. is looking to inject as much as $1 billion to recapitalize Unity Bank Plc, which is struggling to build buffers after a slowdown in Africa’s biggest economy, according to two people familiar with the matter. Bloomberg reported that New York-based Milost offered to invest $700 million in equity and $300 million in five-year bonds that can be converted into shares in the Nigerian lender. It quoted one of those familiar with the deal to have said this.
The private-equity firm will get an initial stake of about 30 percent in the Lagos-based bank in exchange for its first equity investment of $250 million, the person said. The transaction is still subject to a due diligence as well as regulatory approvals, the people said. The first part of the deal may be completed in the second quarter, one of the people said. The rest of the cash will be drawn down in intervals over a period of four years, provided Unity Bank has sufficient shares to issue to Milost, one of the people said. Some small- and mid-sized Nigerian lenders are battling to rebuild capital levels after a slump in oil prices triggered a foreign-currency shortage and a contraction in the country’s economy in 2016 made it difficult for businesses to repay loans.
Unity Bank, which was formed out of the merger of nine banks between December 2005 and March 2006, said in April last year that it is in talks to sell its non-performing loans to avoid penalties after missing a deadline set by regulators on its recapitalization plans. An investment in Unity Bank will be Milost’s third in a publicly traded Nigerian company since it agreed to pump $350 million into oil-services company Japaul Oil & Maritime Services Plc in February and to provide a $250 million financing facility to Resort Savings & Loans Plc. Several calls to the numbers listed on Milost’s website went unanswered.
The private-equity firm is targeting companies that trade at less than half of their intrinsic value using a facility combining debt and equity that it calls the Milost Equity Subscription Agreement, it said in an emailed statement on Monday. Milost buys shares of a company at a minimum 50 per cent premium to its market value, and then pegs this price over the next 90 days.