The Dangote Group, Africa’s largest conglomerate, is exploring the sale of a 12.5 percent stake in its newly commissioned refinery as it grapples with liquidity concerns, according to the Global rating agency, Fitch Rating.
In 2021, Nigerian National Petroleum Corporation (NNPC) acquired a 7.25 percent stake in the Dangote refinery’s project entity for $1.0 billion, with an option to purchase the remaining 12.75 percent stake by June 2024.
“Since the option has not been exercised, the group plans to divest a 12.75% stake in DORC in 2024,” Fitch Ratings said in its latest note.
Fitch added, “The group intends to service its significant syndicated loan maturing in August 2024 from the equity divestment. However, timely divestment and meeting the imminent maturity is highly uncertain in our view”.
Fitch noted that Dangote has immediate debt servicing requirements related to the syndicated loan raised to finance the construction of the refining company.
“Further delays in meeting the funding requirements would significantly increase the likelihood of financial restructuring or default and lead to further rating downgrade,” Fitch explained.
The company’s oil refinery operated at about 50 percent capacity in the first half of the year, at 325,000-375,000 bpd, Fitch said, while Dangote’s fertiliser business was hindered by inadequate gas supply.
“The EBITDA contribution from the refinery has been far below our previous projection as the facility is ramping up and optimizing production,” Fitch Rating said.
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“We expect gradual improvement in EBITDA contribution from DORC going forward following the initiation of gasoline production in Q3 this year,” the rating agency added.
Fitch said Dangote group has senior secured debt raised at subsidiary levels amounting to $2.7 billion at end-2023 representing 49 percent of total group debt.
“The debt structure also includes an on-demand shareholder loans from its ultimate parent Greenview plc, amounting to $2.3 billion representing 43 percent of total debt,” Fitch said.
“We view the shareholder loans as subordinated debt. The company has also raised senior unsecured debt amounting to N350 billion with long-dated maturities in 2029 and 2032 to finance capex requirements,” Fitch added.
Two months ago, Aliko Dangote, the founder of Dangote Group revealed that he has paid off $2.4bn of the $5.5bn loan for his $19bn Lagos-based refinery.
“We borrowed the money based on our own balance sheet. I think we borrowed just over $5.5bn. But we also paid a lot of interest as we went along, because the project was delayed because of a lack of land, also the sand-filling took a long time. Almost five years or so we didn’t do anything.
“We actually started in 2018. We borrowed that much. We have, of course, paid interest and some principal, about $2.4bn. We’ve done very well. We now have only about $2.7bn left to be paid. So we’ve done very well for a project of that magnitude,” he said.
