Nigeria's biggest and oldest leasing firm, C&I Leasing, plans to raise funds to buy more vessels to lease to oil companies and expand its business in Ghana as Dubai-based private equity firm Abraaj exits, its chief executive said.
C&I Leasing supplies patrol boats and tug boats to Shell, Mobil, Chevron and NNPC's operating unit, via long-term contracts. It has 23 vessels and competes with French rival Bourbon Offshore. "We are looking at increasing our footprint in our current business, increasing our vessel and fleet management business. Our next plan is to introduce our marine business in Ghana over the next 1-3 years," chief executive Andrew Otike-Odibi told Reuters.
He said the company is planning to issue bonds next month to raise seven billion naira ($22.3 million), partly to refinance existing debt of up to three billion naira.
The leasing company is in talks with local pension funds for the five-year debt, which would also be used for working capital and to acquire new vessels. Nigerian firms are tapping bonds this year after the government redeemed some treasury bills to lower yields instead of rolling them over. Analysts expect the central bank to cut interest rates this year as inflation slows.
The 27-year old company also plans to raise fresh funds via the equity market, with about 40 percent of a target of between $10 million to $50 million over the next five years coming from share sales, Otike-Odibi said.
The company is listed on the Lagos stock exchange and its core investors are also directors, owning 56 percent of the shares while the rest is free-float, he added. C&I Leasing posted a 23 percent rise in pretax profit for 2017 to 1.28 billion naira. Its shares more than doubled last year and have risen 8.5 percent so far this year.
On Wednesday they were up 2.26 percent to 1.36 naira. C&I Leasing has 44 billion naira worth of total assets, of which 30 billion naira is invested in marine assets contributing 60 percent of profits and seen rising to 65 percent over the next five years.
The company shut its vehicle distribution unit at the start of Nigeria's worst recession in a quarter of a century, to focus on oilfield service marine vessel rentals, fleet management and personnel outsourcing. "We don't see the retail market taking off until the economy stabilises again. People might have jobs today but you can't guarantee job retention, therefore making payment of lease rentals uncertain," Otike-Odibi said.
He said the company's debt ratio would be cut to 70 percent from 80 percent now and it would redeem a $2.4 million loan it got from Aureous Capital, now part of Abraaj group, from part of the proceeds of the bond sale. He said Abraaj was also looking to exit another $10 million loan this year. "Besides the last two years, where we reinvested cash to support business growth, we have paid out dividends," Otike-Odibi said.