The Nigerian National Petroleum Corporation (NNPC) has obtained a prepayment funding of circa US$1b to support the upstream operations of its subsidiary, Nigerian Petroleum Development Company (NPDC).
The crude oil prepayment has enabled NNPC to pay NPDC’s Tax obligations to the Federal Government of Nigeria, of circa US$700M with the balance utilised to fund NPDC’s capital and operating expenditures.
The prepayment financing is backed by future oil production of NPDC, and utilises a well-established structure to enable the purchaser of the crude, Eagle Export Funding Limited, to raise financing in the domestic and international markets, to fund an upfront payment to NNPC under a Forward Sale Agreement (FSA).
The financing which funded the prepayment has been structured over two tranches: a 5 year USD amortizing tranche (“Tranche 1”) and a 7 year NGN amortizing tranche (“Tranche 2”). Both tranches benefit from a cash sweep with the 7-year tranche having a 1-year non-call period.
These tranches shall be repaid by Eagle Export Funding Limited from the export sale proceeds of the NPDC crude, which in turn are backed by Letters of Credit, issued by banks with a minimum credit rating, in line with market precedent.
The export price for the crude is the relevant NNPC Official Selling Price (OSP) for the corresponding calendar month and crude grade. Vitol and Matrix Energy have executed the standard NNPC Crude Oil Sale & Purchase Agreement.
The participants in the Eagle Export Funding Limited deal include Standard Chartered Bank, United Bank for Africa, Afrexim Bank, Union Bank and two oil trading companies, Vitol and Matrix Energy.
Despite the constrained liquidity situation in the financing markets due to the COVID-19 pandemic; the pricing and terms obtained for the USD and NGN funding tranches were very competitive and better than precedent transactions.