Breach of Capital Adequacy Ratio

EBN Finance Company B.V.

16 August 2024

 

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16 August 2024

Breach of Capital Adequacy Ratio of Ecobank Nigeria Limited

Due to the significant devaluation of the Naira in the first quarter of the year, which saw the Naira fall from ₦951.79 to the US dollar as at 1 January 2024 to ₦1628.47 as at 31 July 2024, the total capital adequacy ratio of Ecobank Nigeria Limited (the "Bank"), as calculated in accordance with the BIS Guideline, has fallen below 10 per cent at 30 June 2024, leading to a breach of the Bank's capital adequacy covenant in its U.S.$300,000,000 7.125 per cent. Senior Note due 2026 (the "Senior Note") issued to EBN Finance Company B.V. ("EBN Finance") as issuer of U.S.$300,000,000 7.125 per cent. Senior Note Participation Notes due 2026 (the "Notes"). A material percentage of the Bank's Risk Weighted Assets were denominated in US dollars as at 31 December 2023, with its shareholders' equity being denominated in Naira, the rapid devaluation caused an inflating effect on the Bank's Risk Weighted Assets, which caused this decline in its capital adequacy ratio.

The impact felt by the Bank on its capital adequacy ratio was equally felt across the banking sector, with some banks impacted more than others.  This prompted the Central Bank of Nigeria (the "CBN") to take a number of steps including requiring banks to take steps to increase their core capital based on certain specified metrics by April 2026. The Bank has since submitted and obtained the CBN's approval and support for its Capital remediation plan to address its capital adequacy. 

Therefore, the Bank and EBN Finance now intends to solicit consents from the holders of the Notes to approve an amendment to the Senior Note to disapply on a time limited basis the 10 per cent contractual minimum capital adequacy ratio required by the Senior Note and to waive any Event of Default or Potential Event of Default that arose as a result of the breach of the capital adequacy ratio. The details of the steps the Bank intends to take to restore its capital adequacy ratio to compliant levels will be set out in the consent solicitation memorandum which will be prepared by the Bank in connection with the proposed consent solicitation. 

This announcement is made by EBN Finance Company B.V. and constitutes a public disclosure of inside information under Regulation (EU) 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.

 

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