OFFSHORE FINANCING: HOW TO SECURE FUNDING FOR YOUR BUSINESS PROJECTS

Senior Project Manager

FinancialBridge provides various offshore financing options for business projects, it determines, after proposal review, the appropriate funding body that is best suited for the proposed project.

With the USA Ex-Im Bank Programme, Financialbridge will package and procure 85% of the U.S. cost content of the Project as Loan from one of its associated U.S. Lenders that will utilize the Credit Guarantee Programme of U.S. Ex-Im Bank and the Promoter’ s Corporate Guarantee to provide related U.S. Loan.

The promoter of the project will also be required to provide the remaining 15% of the U.S. cost content as Equity Contribution as well as satisfy local in-country costs requirements, including obtaining local Bank Guarantee to support related Loan Facility.

The U.S. Loan will have medium term tenure of over 5 – 7 years, at an interest rate of 2.0% above Six Months Floating LIBOR (London Interbank Offered Rate).

To start -up the process of obtaining required Funding, the promoter is required to retain the services of Financialbridge and pay negotiable Retainer/Business Development Fee to instrument and procure the U.S. Funds. Following receipt of the payment, Financialbridge will develop a Bankable Business Plan that will satisfy U.S. Export Financial Market requirements and procure the Project Loan.

The Fee will further cover service coordination of Project Loan Packaging and Procurement that will involve the Borrower and the U.S. Lender. The Engagement Fee is refundable in full if the Loan is not procured after the promoters satisfy all the statutory U.S. Financial Market requirements, as outlined under the scope of responsibilities of the business promoters.

The U.S. Lender will underwrite the submitted statutory documentation leading to Loan approval, following which the Lender will request the U.S. Ex-Im Bank for issuance of Political Risk and Medium-Term Insurance/Comprehensive Credit Guarantee before disbursement of related Loan.

The process of underwriting the Loan through approval and disbursement could be concluded within 45-90 days after the U.S. Lender receives the complete statutory documentation as outlined.

Once the loan is approved, Financialbridge will charge a Loan Procurement Fee of 5-7% of Loan amount aid by the U.S. Lender and added to the cost of the Project.

Scope of Responsibilities of Financialbridge and the Promoter/Borrower:

1. Financialbridge shall be responsible in carrying out tasks that will result in the successful procurement of U.S. Loan for the implementation of the Project in Nigeria, including:

1.1 Conduct of Feasibility Study and preparation of Bankable Business: Plan that will satisfy U.S. Export Financial Market requirements. The Business Plan will be concluded within 30-45 days from receipt of Engagement Fee, Data from Market Research as well as Borrowers information. The draft of the Business Plan will be forwarded to the promoter Company for approval and possible input before product ion of final Document.

1.2 Turnkey Packaging, Qualification, Documentation, Sourcing and Procurement of Project Loan from a U.S. Lender, utilizing Ex-Im Bank Comprehensive Guarantee.

1.3 Processing, Due Diligence, Approval and Disbursement of Project Loan within 45-90 days of the U.S. Financial Institutions receiving and underwriting complete statutory documentation from the promoters.

1.4 If required, Financialbridge can also be engaged to Package and Instrument Private Placement of Shares of Common Stock of promoters’ company to raise additional funds through Private Equity Investment, utilizing a local Nigerian Bank as Issuing House.

The Funds raised through the Private Placement could be applied to fund Local Project Site Development / In-Country Costs as well as required Equity Contribution, etc.

2. Promoter / Borrower: The promoter/borrower shall be responsible for the following within the requirements for successful Loan Procurement, including:

2.1 Obtaining Nigerian Bank Guarantee for 85% or 75% of the total U.S. Loan amount to fund the Project, depending on the Ex-Im Bank requirements.

2.2 Securing all required Permits and Licenses from Nigerian Regulatory Authorities

2.3 Submission of Three Years Audited Financial Statements of the Nigerian Bank as certified by a renowned Accounting Firm.

2.4 Provision of Equity Contribution of 15% of total U.S. costs content within the overall Project cost for U.S. Ex-Im Bank Guaranteed Loan to be added to 85% of total U.S. cost content as Loan.

2.5 Funding of all Professional Fees, including U.S. Lender’s and Ex-Im Bank Project Underwriting and Loan Closing Fees.

2.6 Payment of Retainer/ Business Development Fee to Financialbridge for Loan Packaging, Qualification, Processing, and Procurement, including development of Bankable Business Plan to satisfy Lenders requirement for related Loan.

Exclusions and Responsibilities of Project Promoters:

1. Local Taxes, Custom Duties and VAT (into the destination country)

2. Port Clearing of Plants, Machinery & Equipment and Inland Transportation to Site

3. Construction Authorizations and Permits

4. Connections to the Local Networks (Water, Electricity, etc.)

5. Visa Processing and In-country Room & Board for Expatriate Engineers in the duration of Construction & Erection.

6. Security for the supplied equipment at site and U.S. Expatriates

WHEN THOSE THAT ARE PAID TO KNOW DON’T KNOW

Soludo - seeks solution

Finally, Nigeria has admitted to the fact that she is not immune to the global economic crisis that resulted from the international capital melt-down, which has its origin in the United States of America’s mortgage crisis. The fact of the crisis seeping through our national border to affect our very existence has been known by many except those who should know and are paid to know, in the first place. And why they chose to play hide and seek, still confounds the logically minded. What is, however, important now is to look at ways we can salvage the situation so as to keep businesses going now that our pretensions have fallen flat on the face.

The world or Nigeria is not new to economic crisis which may result from any of the following situations either by way of shortages of goods or services as a result of over-demand, when companies can not meet up with supplies; or inflation when general price level for raw materials and finished goods rises faster and well above annual average; or as a result of recession or depression which is a situation given rise to by slow-down in economic growth, marked by a decline in orders, high inventories, low capacity utilization and lay offs of workers.

Nigeria in particular has experienced all the above stated factors over the years except, arguably, recession or depression. We have had a fair dose of shortages in the 80s may be as a result of the way the economy was being managed then with heavy government involvement. Just as we have had to perpetually contend with inflation which is still present with us till date.

Before this current crisis things have changed for the better in the way the economy is being managed. The economy has been deregulated. Government has divested from most of the concerns that hitherto created bottle necks in the supply chain of goods. How well this approach to running the economy has been is another kettle of fish, however. But of immediate concern is how we can best manage the present crisis.

Before proffering some strategic options, we need to ascertain that we have on our hands all the economic situations as in shortages, inflation and recession and or depression in Nigeria. It can be said that we do not have shortages as in the developed markets of the west, at least basic needs might be costly, but are available.

It is equally difficult to state that we are in a state of recession because the ingredients for recession are not too visible, at least, for now. Some countries in Europe have already declared recession. In Britain, prices of goods are already driving down.

Arguably, the only factor present with us is inflation and economic instability which has to do more with poorly formulated policies and halt-heated application of same. This situation has been long with us and is not about leaving us. So how do we manage it to our advantage, particularly the businesses?

The very first strategy to pursue in times like this is policy consistency. Nigeria has never had a stable policy on any thing. No one policy has ever lasted up to five years in operation. There are some that were even changed as soon as they were made. Policy inconsistencies and lack of basic guidelines in some key areas as well as official tardiness has combined to create instability in businesses’ plans. Just as lack of state plan from which business can draw from and decayed infrastructure has made the operating environment hostile. A good example of official tardiness that impact negatively on businesses is the ugly drama playing out at the port by the name ‘port congestion,’ which is another shame.

Strategic option number two is to look inward and take advantage of local resources both material and men, which is in abundance here. Let us look back to the nineties when our businesses suffered divestments by the west, leaving Nigerian managers in the saddle. Companies like Lever Brothers as it was then called, Guinness Nigeria plc, Nigerian Breweries to mention a few, did so well in their respective areas of business. They recorded growth and expansion to the envy of the run-away investors, now back.

Our businesses are not wanting in the area of product development with local content base. For example, in the 1980s, NBL came up with a soft drink called ‘Green Sandy’ which suddenly disappeared from the market without trace. The performance of our banks in this area is legendary. More of this innovation will leverage us from the hostile global economic environment where we are too technically weak to compete.

One other area to look at is pulling together of resources to fund some special projects of common value and interest just as the banks did in the area of security recently. Research projects in area of raw material sources could also be jointly funded.

Rather than raise prices endlessly, businesses should take the option of concentrating on those products that gives higher returns but at a moderate cost. For example, Cowbell Milk introduced sachet milk to reduce cost of packaging and yet, has everyone taking milk.

Lastly, it will be appreciated if heavy investment is made in the area of infrastructure. Our roads remain in pretty bad shapes. Energy power is completely out with PHCN refusing to give up power it has held on since it came to be. The education sector remains comatose. The communications sector is having a field day short-changing subscribers on the cheap excuse of having to cope with hash business climate.

Just how do we go forward and when are we going to behave?

GET OJUKWU TO YOUR FUNCTION FOR HALF A MILLION NAIRA

The expensive prince

The Dim Odumegwu Ojukwu is an endearing brand to people from the Igbo speaking part of Nigeria. Undoubtedly, many Nigerians of Igbo extraction would wish Ojukwu’s presence at their functions, either social or political. The former Biafran war lord is, however, making the best profitable use of peoples’ wishes to have him grace their occasions.

It is reported that to get Ojukwu to attend any event, the invitation card addressed to him must be accompanied with a N500,000 cheque.

FINBANK VS AQUITANE

Ori Adeyemo

Finbank and Aquitane have taken their battle over excess bank charges to the court of law. Aquitane which conducted a private placement last year was reported to have had some of its transactions funded by Finbank especially as the oil company endeavoured to look good in the public space during its private placement exercise.

Months after the conclusion of the private placement, Finbank informed the management of Aquitane of the need to pay the sum of N7billion being debt owed to the bank. Aquitane, we were informed took issue with the bank. It invited a forensic accountant, Ori Adeyemo, to audit its transactions with Finbank. At the end of the review and auditing, Aquitane demanded a claim of N2.5billion being refund of excess charges to Aquitane.

The two parties wait patiently for the court to adjudicate on the matter.

HOW BANKPHB LOST N7BILLION TO THE USA SUBPRIME CRISES

BankPHB may have lost the equivalence of N7billion directly to the United States of America’s property sector crises. Sources in the bank informed Fortune and Class Weekly that the bank had excitedly approved a proposal by one of its customers that wanted to invest in the USA’s property market in the aftermath of the subprime crises when prices of property started sliding.

The source confided that the customer had argued when the downward spiral of the USA’s property market commenced in its first phase that taking position in the sector by investing when prices had gone down would provide ample opportunities for profit taking. The customer who is said to be familiar with the USA’s property market asserted that the price slide would only last a short while.

To position in the property market by investing when prices initially dipped, the customer asked for a N14billion facility and approval was given. “It turned out that soon after the N14billion was invested, property prices literally went on a free fall. By the time the facility was called in, the value of the N14billion investment was in the region of N7billion.” The BankPHB insider said.

Growing Suspicion Ndi Okereke-Onyiuke Is Planning To Transmute From DG To CEO

DG, NSE

Not a few capital market watchers hailed the announcement of the demutualization of the Nigerian Stock Exchange. Literarily, demutualization is the equivalent of the stock exchange transforming from a quasi public sector self regulating organisation (SRO) to a publicly quoted company, accountable to its shareholders and governed by the laws and regulations that other publicly quoted companies are answerable to in the market.

Most stakeholders had commended the prospect of the demutualization in the expectation of the fresh breathe of life that would predominate in the capital market under a new leadership and operating environment. Some operators were particularly excited over the expectation that the current Director-General of the NSE, Prof. Ndi Okereke-Onyiuke, will not be qualified to continue in the office of the CEO of a demutualised stock exchange.

Recent indications emanating from the stock exchange, according to observers, are telling signs the DG is clearing the field to make her continued stay in the high office of the stock exchange secured even beyond the year 2010 proposed year for the demutualisation of the exchange.

Reports of recent administrative activities at the exchange indicate that Okereke-Onyiuke has been restructuring, personnel are being moved and new appointments being made. Of major concern to stakeholders is that some of the recent appointments at the exchange are somewhat connected to the DG. For this reason, the concerned stakeholders argued that the DG’s maneuvers suggest that she is positioning her people to pave the way for her come back to the head of the stock exchange after its demutualization.

PRICEWATERHOUSECOOPER GETS MANDATE TO RESTRUCTURE SECURITIES AND EXCHANGE COMMISSION

SEC is ill

Though it is yet to be made public, it has been confirmed that the capital market apex regulatory agency, the Securities and Exchange Commission is being sized up and re-engineered to cope with emerging challenges of regulating the nation’s capital market.

SEC’s inside source said multinational management and auditing giant, PriceWaterHouseCooper has been mandated to refocus the operational template of the Commission. The restructuring consultant is expected to review the Commission’s processes and performance profile with intent at positioning it to be more responsive to new developments in the capital market.

Geofluid Private Placement: The Scandal In The Making

MD, Oceanic Bank Plc

A big row is in the making over the private placement of Geofluid, a small-time, highly indebted oil company that was dusted off and burnished for presentation to the public by Oceanic Bank which packaged and acted as one of the issuers to the private placement exercise of the company.

Recall that Fortune&Class Weekly had raised the alarm over the magnitude of indebtedness of the company and had highlighted the apparent fact that the private placement was, in fact, packaged and issued by Oceanic Bank to recover debt owed it by Geofluid.

On the whole, it was a bad buy for many investors that were deceived into buying into the company through the private placement. But now, some more sinister allegation of financial engineering are being raised by concerned industry experts and investors in the placement. They claimed investigation is ongoing.

CAPITAL MARKET CRASH: THE CASE AGAINST THE BANKS

EFCC Boss

When the Director-General of the Securities and Exchange Commission demanded that some banks’ chief executives that had become richer than their banks should be questioned, it was the first formal acknowledgement of the abuses some commercial banks chief executives perpetrated in the Nigerian stock market while the gains and benefits in the market were on the upward swing.

Yet in a report filed by Reuters, a news agency, and published in various national newspapers in August 2007, it had become apparent that there were wary signs of obvious manipulations in the market for the benefits of a few, especially, banking chiefs.

“Investors in Nigeria’s burgeoning stock market are seeing danger signals that the recent rally is turning into a bubble,” the report filed in the third quarter of 2007, had observed .

“Concerns focus on banks, where share price growth has been spectacular since a wave of consolidation in 2005. Most bank stocks have more than doubled in value this year (2007) alone — some have risen by more than 500 per cent — and the majority now trade at more than 20 times their expected 2008 earnings,” the report alerted.

Furthering its alarmed reading of the stock market back in 2007 when it seemed everybody was a winner in the stock market, the Reuter report added:

“Investors say these multiples are unsustainable, even for a fast-growing “pioneer” market like Nigeria, where investor confidence has been growing steadily since economic reforms began in 2003. The report quoted Mr. Jonathan Chew of Imara Asset Management UK Limited which had $25 million invested in Nigerian securities back then as saying that:

“All the indicators of a market going out of control are here, when the entire retail sector is talking about stocks and shares, you know it is getting toppy,”

Reuters had observed then that fears of a bubble in the banking sector have mounted on reports that some banks were engaged in highly leveraged share purchase schemes through stockbrokers. The Reuters 2007 report supported this claim with the opinions of notable operators in the market.

“One senior bank executive said he knew of one case where a capital market operator borrowed six billion naira from a bank to invest in that bank’s shares.” The report asserted while quoting Bismarck Rewane who the report described as a consultant with Financial Derivatives Co. in Lagos who agreed that the practice (highly leveraged share purchase scheme) was widespread.

“Margin trading is the biggest gamble in town right now. It’s very dangerous,” Rewane was reported to have said.

The Reuters report also quoted Godwin Obaseki, managing director of Afrinvest, who said banks have extended big loans to brokers, perhaps as much as 20 per cent of the whole country’s credit.”

Obaseki was, however, quoted in that report to have said he did not know of cases where banks insisted on the loans being used to buy their own shares, which according to him, would be illegal.

More than a year after the report was filed, the Nigerian stock market had unraveled, the suspicion and alarming indicators have been more or less confirmed by the outburst of the SEC’s DG on banks’ high exposure to the stock market, but more than this is the confirmation of the existence of the illegality Obaseki had denied in 2007 about banks granting loans to stock brokers and investors on the condition that they use the facilities to buy their (banks) shares.

Indeed, the practice became a standard in the banking industry especially during the second wave of public offers conducted by listed banks on the Exchange. Industry players talked of how banks provided funds for brokers and other investors to acquire their own shares during public offer. Industry watchers explained that most of the banks resorted to this to make their standing in the capital market look good to the investing public.

Besides, public offers by the implicated banks provided opportunities for bank chief executives and other directors to jostle to take position in the equity of the bank to acquire enough stakes in the bank either to position for influence or to later trade in the equity when price of the stock moved up,” an expert revealed.

“Again, banks also engaged in providing funds to brokers and investors to acquire shares of banks considered choice banks, especially the shares of First Bank Plc, this is one of the reasons the public offer of the bank was over-subscribed by more than 600 per cent, the bank merely wanted to raise N100 billion but it ended up with more than N600billion, money mostly funded towards acquisition of its shares from other commercial banks,” the stock market expert said.

“The idea is that since public offers provide the opportunity to acquire enough shares without the possibility of price moving as a result of demand for the shares outstripping demand as it would happen in the secondary market, funds are routed into the market to acquire as many shares as possible during the public offer with intent at trading in the shares when they are listed for transaction in the secondary market,” the expert further explained.

While the bullish run persisted in the market, the performance of a bank’s stock in the stock market was a measure of the buoyancy of the bank, expert said; this, coupled with the desire of bank’s management to raise cheap funds from the market made many banks to provide funds to willing stock brokers and selected investors to mop their shares in the secondary market. Prices of such banking stocks naturally moved up because of the pressure of the programmed demand on the stocks.

“I can tell you that at a point in time, it seemed as if the only preoccupation of most banks was manipulating the stock market to wring out the last hope of gains. All these contributed to defacing the market and inevitably led to the crash of the Nigerian stock market,” an analyst submitted.

PROFILE OF TRANSGLOBE LEGACY OF FRAUD

EFCC Boss

APC/31/04        Joseph Ibikunle Jacobson v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits, the value of which as at the time of hearing was estimated at N84,600.00.

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/30/04   Allbond Investment Ltd. v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N102,481.70

The respondent having purchased the stocks involved was strongly reprimanded and cautioned to desist from future violations of the provisions of the ISA and the Rules made thereunder.

APC/29/04        Abiodun Ademorin Shonibare v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N78,603.43.

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends

APC/28/04        Raymond C Iwunwa v Transglobe Finance & Investment Ltd

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N102,454.45

The respondent having purchased the stocks involved was strongly reprimanded and cautioned to desist from future violations of the provisions of the ISA and the Rules made thereunder.

APC/27/04        N.K. Okali v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N228, 025.70

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/26/04        Luke N Odinagbonu v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N119,790.00

The respondent having purchased the stocks involved was strongly reprimanded and cautioned to desist from future violations of the provisions of the ISA and the Rules made thereunder.

APC/25/04        Nwosu Nathan v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N137,295.93

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/24/04        Engr. Abayomi Adenekan v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N254,787.00

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends

APC/23/04        Ilobinso A.C v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N232,914.32

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/22/04        Dr. Victor Ogunyemi v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N278,180.94

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/21/04        Omelora Inv. & Finance Ltd v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N572,237.81

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/20/04        S.O. Sakeye v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N27,048.69

The respondent was directed to ensure that the stocks are transferred to the account of the complainant within 2 weeks from the date of the decision and was reprimanded.

APC/19/04        Geoffrey Chima Okafor v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N359,358.74

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/18/04        Mudiaga Ikpen & Philip Uwajue v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N1,231,063.08

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/17/04        Michael Ahuruonye v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N438,188.14

The respondent having purchased the stocks involved was strongly reprimanded and cautioned to desist from future violations of the provisions of the ISA and the Rules made thereunder

APC/16/04        Basil Nnana Mouka v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N414,560.97

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends

APC/15/04        Umeh Nelson Chukwukere vs Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N596,247.74

The CSCS was directed to restore the investor to the position he ought to have been had the stocks been lodged regularly.

APC/14/04        Major B.M Haruna v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N1,228,311.80.

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/13/04        Okafor Gregory MadukaVs Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N1, 446, 660.55.

The respondent having purchased the stocks involved was strongly reprimanded and cautioned to desist from future violations of the provisions of the ISA and the Rules made thereunder.

APC/12/04        Sylvanus U Obiejesu v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N3,387, 019

The respondent was directed to restore the complainant within two weeks from the date of the decision including the accruing bonuses and dividends.

APC/11/04  Pinefields Investment Ltd v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N1,071, 582. 42.

The respondent was directed to pay all interests accruable in respect of the un-remitted proceeds of the sale within two weeks from the date of the decision and was strongly reprimanded.

APC/10/04    Kogi State Foundation v Transglobe Finance & Investment Ltd.

Non-lodgment of securities and accrued benefits the value of which as at the time of hearing was estimated at N 1,299, 050. 11.

The respondent having purchased the stocks involved was strongly reprimanded and cautioned to desist from future violations of the provisions of the ISA and the Rules made thereunder