Implications for stakeholders as C&I Leasing converts Neoma’s $10m loan to ordinary shares

BY EDIRIN MICHAEL

Recently, on Tuesday, November 3, C&I Leasing Plc (C&I Leasing), a foremost leasing and business support services company in Nigeria, issued a notice to hold an extraordinary general meeting to approve the conversion of Neoma Africa Fund, L.L.C its nominee, assignee or transferee of the $10,000,000.00 loan stock issued by the company to 987,500,000 ordinary shares.

For context, a notice at the Nigerian Stock Exchange said Neoma Africa Fund LLC, formerly Aureos Africa Fund L.L.C. is a private equity fund being advised by Neoma Manager (Mauritius) Limited with a current gross asset value of $78.4 million.

Providing additional context on the loan conversion, C&I Leasing said, “Neoma Africa Fund, L.L.C. acting by itself, or through its nominee, assignee or transferee (as applicable) intends to convert its $10million unsecured variable coupon redeemable convertible loan stock in registered units of N4.75 or the US$ equivalent units into ordinary shares of the company as contemplated under the loan stock agreement entered into on January 14, 2010 (as amended on August 31, 2016, and June 17, 2020) between the Company and Neoma Africa Fund L.L.C. and the placement memorandum issued by the Company on December 29, 2009.

“That on 24th May 2017 the Company passed a resolution for the conversion either in whole or in part of the $10million convertible loan stocks issued to Abraaj Nigeria Advisors Limited.”

Continuing, the notice said, “C&I Leasing shall not engage in any capital raising through the issuance of equity securities such as ordinary shares, preferred shares, bonds, loans, warrants, rights, options or other similar instruments or securities which are convertible into or exercisable or exchangeable for, or which carry a right to subscribe for or purchase ordinary or preferred shares of the company or any instrument or certificate representing a beneficial ownership interest in the ordinary shares of the company, including global depositary receipts and American depository receipts and any other security issued by the company, even if not convertible into ordinary shares, that derives its value and/or return based on the financial performance of the Company or its shares whether through rights offerings, follow-on offerings or any other offering or transaction until the conversion is affected.”

With this notice and the ensuing approval to proceed, the question about whether the loan conversion move was good or bad for C&I Leasing’s critical stakeholders is worth pondering. What are the implications for C&I Leasing’s stakeholders?

Or, why did Neoma choose to convert its loan to ordinary shares instead of redeeming its full monetary value in one fell swoop? There can only be one reason.

Having watched C&I Leasing’s growth trajectory for a decade, it was clear to the Neoma fund’s manager that C&I Leasing is worth every bet; hence, the decision to stick with the organization. Evidently, it appears glaring to Neoma that the C&I Business has outperformed over the years and will continue to be successful despite the major headwinds occasioned by the global pandemic.

In a way, it is satisfying when foreign investors pass a vote of confidence in your business operations. It sure signifies that your business is well-managed, highly ethical and has good prospects.

Speaking to CNBC Africa recently, Andrew Otike-Odibi, managing director/chief executive officer, C&I Leasing, said the Neoma Loan stock has for the last 10 years, helped grow the C&I Leasing business to its current size and the decision of the fund manager to convert their loan to shares is a vote of confidence for C&I Leasing since Neoma had an option to either redeem or convert but chose to stay and stick with the business.

Otike-Odibi, in the interview with CNBC Africa, also spoke about the company’s performance in the past nine months of 2020 and its future outlook. While he noted that the asset-related aspect of the business suffered some decline ostensibly due to the devastating impact of the COVID-19 global pandemic, the non-asset aspect of the business grew significantly.

In his assessment, although the outlook for the first half of 2021 appears a bit gloomy, the C&I Leasing Managing Director expressed optimism that the business will continue to innovate as well as focus on cost optimization to drive value for all its stakeholders.

Specifically, he noted that one of the major strengths of C&I Leasing lies in its diversity in terms of business approach and that attachment to multiplicity will continue to carry the business on despite the prevailing headwinds.

A cursory look at C&I Leasing’s stakeholder groups – investors, shareholders, regulators, employees and the general public – vis-à-vis the recent move by Neoma to convert its loan to ordinary shares indicates a win for all as the new validation will motivate the business to continue in its strides in delivering excellent value to all its stakeholders.