THIS DOCUMENT IS IMPORTANT AND YOU ARE ADVISED TO CAREFULLY READ AND UNDERSTAND ITS CONTENTS. IF YOU ARE IN DOUBT ABOUT ITS CONTENTS OR THE ACTION TO TAKE PLEASE CONSULT YOUR STOCKBROKER, SOLICITOR, BANKER OR AN INDEPENDENT INVESTMENT ADVISER. THIS PROSPECTUS HAS BEEN SEEN AND APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF NAHCO AND THEY JOINTLY AND INDIVIDUALLY ACCEPT FULL RESPONSIBILITY FOR THE ACCURACY OF ALL INFORMATION GIVEN AND CONFIRM THAT, AFTER HAVING MADE INQUIRIES WHICH ARE REASONABLE IN THE CIRCUMSTANCES AND TO THE BEST OF THEIR KNOWLEDGE AND BELIEF, THERE ARE NO OTHER FACTS, THE OMISSION OF WHICH WOULD MAKE ANY STATEMENT HEREIN MISLEADING.
For information about risks factors which should be considered by prospective investors, see Risk Factors on page 29.
Nigerian Aviation Handling Company Plc RC 30954 N5,000,000,000 BOND ISSUANCE PROGRAMME For the Issuance of a Bond with maturities of 5 years and longer
LEAD BOOK RUNNER/ ISSUING HOUSE
RC 622258 JOINT BOOK RUNNERS/ ISSUING HOUSES
RC 125097
RC 312299 RC 189502 RC 873198
This Shelf Prospectus will be available on the following websites from [●] to [●]:
www.sec.gov.ng www.nahco.com www.chapelhilldenham.com www.firstcitygroup.com www.stanbicibtcbank.com www.greenwichtrustgroup.com www.gticapitalltd.com www.irokocapital.com THIS SHELF PROSPECTUS AND THE SECURITIES THAT IT OFFERS HAVE BEEN APPROVED AND REGISTERED BY THE SECURITIES & EXCHANGE COMMISSION. IT IS A CIVIL WRONG AND CRIMINAL OFFENCE UNDER THE INVESTMENTS AND SECURITIES ACT (NO. 29 OF 2007) TO ISSUE A PROSPECTUS WHICH CONTAINS FALSE OR MISLEADING INFORMATION. THE CLEARANCE AND REGISTRATION OF THIS PROSPECTUS AND THE SECURITIES WHICH IT OFFERS DOES NOT RELIEVE THE PARTIES FROM ANY LIABILITY ARISING UNDER THE ACT FOR FALSE AND MISLEADING STATEMENTS CONTAINED HEREIN OR FOR ANY OMISSION OF A MATERIAL FACT.
THE REGISTRATION OF THE SHELF PROSPECTUS AND ANY SUPPLEMENTARY PROSPECTUS THEREAFTER DOES NOT IN ANY WAY WHATSOEVER SUGGEST THAT THE SECURITIES AND EXCHANGE COMMISSION ENDORSES OR RECOMMENDS THE SECURITIES OR ASSUMES RESPONSIBILITY FOR THE CORRECTNESS OF ANY STATEMENT MADE OR OPINION OR REPORT EXPRESSED THEREIN.
THIS SHELF PROSPECTUS IS TO BE READ AND CONSTRUED IN CONJUNCTION WITH ANY SUPPLEMENT HERETO AND ALL DOCUMENTS WHICH ARE INCORPORATED HEREIN BY REFERENCE AND, IN RELATION TO ANY TRANCHES (AS DEFINED HEREIN) OF INSTRUMENTS, TOGETHER WITH THE APPLICABLE PRICING SUPPLEMENT. THIS SHELF PROSPECTUS SHALL BE READ AND CONSTRUED ON THE BASIS THAT SUCH DOCUMENTS ARE INCORPORATED AND FORM PART OF THIS SHELF PROSPECTUS.
THIS SHELF PROSPECTUS IS DATED [.], 2011
TABLE OF CONTENTS
1. PRESENTATION OF INFORMATION ...... 3 2. DEFINITION OF TERMS ...... 4 3. NOTICE TO PROSPECTIVE INVESTORS...... 7 4. DECLARATIONS ...... 8 5. PARTIES TO THE OFFER ...... 9 6. PARTICULARS OF THE PROGRAMME ...... 13 6.1 SUMMARY OF TERMS & CONDITIONS OF THE PROGRAMME ...... 13 6.2 TERMS & CONDITIONS OF THE BONDS ...... 16 6.3 TAX CONSIDERATIONS ...... 21 7. INDUSTRY OVERVIEW ...... 22 7.1 INTRODUCTION TO NIGERIAN AVIATION INDUSTRY ...... 22 7.2 HISTORY OF THE NIGERIAN GROUND HANDLING INDUSTRY ...... 22 7.3 MERITS OF PRIVATIZATION IN THE GROUND HANDLING INDUSTRY ...... 22 7.4 AIRPORT TARIFFS ...... 22 7.5 CONCLUSION ...... 23 8. NIGERIAN AVIATION HANDLING COMPANY PLC ...... 24 8.1 HISTORY AND OVERVIEW OF THE BUSINESS ...... 24 8.2 BUSINESS ACTIVITIES ...... 24 8.3 DIRECTORS OF THE COMPANY ...... 25 8.4 KEY MANAGEMENT STAFF ...... 28 9. USE OF PROCEEDS ...... 30 10. RISKS AND MITIGATING FACTORS ...... 34 11. FINANCIAL SUMMARY ...... 36 11.1 REPORTING ACCOUNTANTS’ REPORT ...... 36 11.2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES ...... 37 11.3 PROFIT & LOSS ACCOUNT...... 38 11.4 BALANCE SHEET ...... 39 11.5 CASH FLOW STATEMENT ...... 40 11.6 NOTES TO THE FINANCIAL STATEMENTS ...... 41 11.7 5 YEAR FINANCIAL SUMMARY ...... 47 12. NIGERIA OVERVIEW ...... 48 13. STATUTORY AND GENERAL INFORMATION ...... 55 13.1 INCORPORATION & SHARE CAPITAL HISTORY ...... 55 13.2 SHAREHOLDING STRUCTURE ...... 55 13.3 DIRECTORS’ INTERESTS ...... 55 13.4 STATEMENT OF INDEBTEDNESS ...... 56 13.5 CLAIMS AND LITIGATION ...... 56 13.6 MATERIAL CONTRACTS...... 56 13.7 DECLARATION ...... 56 13.8 COSTS AND EXPENSES ...... 57 13.9 CONSENTS ...... 57 13.10 DOCUMENTS AVAILABLE FOR INSPECTION ...... 58 13.11 RELATIONSHIP BETWEEN THE COMPANY AND ITS ADVISERS...... 58 13.12 EXTRACTS FROM THE PROGRAMME TRUST DEED ...... 58
2
1. PRESENTATION OF INFORMATION
Nigerian Aviation Handling Company Plc (“Nahco” or “Nahcoaviance” or “the Company”) maintains its books of accounts in Naira in accordance with the generally accepted accounting principles applicable in Nigeria (“Nigerian GAAP”). The financial information included in this document comprises the audited financial statements of Nahcoaviance for the five years ended December 31, 2010 and the revenue projections for the five years ending December 31, 2015.
Certain statistical information presented in this document on topics such as the Nigerian economy and political landscape and related subjects have been obtained from certain third party sources, as described herein. This third party information is presented in the following sections of this document: “Nigeria Overview”, and “Risk Factors”. Nahcoaviance has accurately reproduced such information and as far as the Company is aware and is able to ascertain from information published by such third parties, no facts have been omitted that would render the information inaccurate or misleading. Nevertheless, prospective investors are advised to consider this data with caution. Prospective investors should note that some of the Company‟s estimates are based on such third party information. Neither the Company nor the Joint Issuing Houses have independently verified the figures, market data or other information on which third parties have based their studies.
Certain figures included in this document have been subject to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
3 2. DEFINITION OF TERMS
“Allotment Date” The date on which Bonds are allotted to participants “Allotment” The issue of the Bonds to successful bidders pursuant to the Bond Issuance Programme “Bonds” The instruments that will be issued by the Company in accordance with the terms of the Shelf Prospectus and any subsequent Supplementary Shelf Prospectus and/or Pricing Memorandum “Bond Issue Date” The date on which the issuer receives the proceeds, also the Allotment Date “Bond Issuance Programme” or the The N5,000,000,000 Bond Issuance Programme described in this “Programme”. Shelf Prospectus issued by Nahcoaviance pursuant to which the Company may issue tranches of Bonds from time to time to a maximum value of N5, 000,000,000 “Bond Maturity Date” The date on which the principal amount is repaid to the investor by the Issuer “Business Day” Any day except Saturdays, Sundays and Public Holidays on which banks are open for business in Nigeria “CAC” Corporate Affairs Commission “CAGR” Compound Annual Growth Rate “CAMA” Companies and Allied Matters Act Cap C20 ,LFN, 2004 “CBN” Central Bank of Nigeria “Chapel Hill” Chapel Hill Advisory Partners Limited “CIFTS” CBN Inter-Bank Funds Transfer System “CITA” Companies Income Tax Act Cap C21, LFN, 2004 (as amended by the Companies Income Tax (Amendment Act No. 11 of 2007)) “ Joint Issuing Houses” FCMB Capital Markets Limited, Greenwich Trust Limited, GTI Capital Limited, Iroko Capital, Stanbic IBTC Bank Plc “Completion Board Meeting Date” The date on which the Offer documents approved by SEC are signed by the Directors and other parties “Coupon” The Interest rate determined by the Book Build which is payable to Bondholders when the Bond is issued. “Coupon Payment Date” The semi-annual dates on which Coupons are paid to the Bondholders, commencing six months from the Bond Issue Date as specified in the Supplementary Shelf Prospectus “CSCS” or the “Clearing System” Central Securities Clearing Systems Limited “Daily Official List” The official publication of The Nigerian Stock Exchange which appears daily, detailing price movements and information for all securities quoted on the Exchange “Dealers” All Broker/Dealers and Primary Dealers/Market Makers with substantive registrations with the SEC and the NSE, who are appointed by the Company to facilitate liquidity in the instruments to be issued under the Programme “DSRA” Debt Service Retirement Account. Debt Service Reserve Account: a Bond Repayment Account established by the Issuer and administered by the Trustee, from which the Trustee shall make payment of interest and the Redemption Sums to Bondholders, at the times and in such amounts as are detailed in the repayment schedule.
4 2. DEFINITION OF TERMS
“Exchange Rate” The applicable USD/NGN currency exchange rate shall be the applicable CBN Dutch Auction clearing rate at the Allotment Date “FGN” Federal Government of Nigeria “High Net Worth Individual/HNI” An individual investor with a minimum net worth of N300 million (excluding real assets such as automobiles, homes and furniture) “IMF” International Monetary Fund “Instruments” Any registered Bond or other security or debt instrument issued by Nahcoaviance. “ISA” Investments & Securities Act No 29 of 2007 “Issue Date” The date on which interest on the Bonds begins to accrue “Lead Issuing House” Chapel Hill Advisory Partners Limited “LFN” Laws of the Federation of Nigeria “Nahcoaviance”or “Nahco” Nigerian Aviation Handling Company Plc. “Naira/NGN” The Nigerian Naira “NEFT” NIBSS (Nigeria Inter-Bank Settlement System Plc) Electronic Funds Transfer. Payment system that reduces the dependence on cash, such that two individuals select a preferred choice of electronic payment depending on the nature of the transaction and circumstances of the purchase. “OTC” Over-the-Counter “PITA” Personal Income Tax Act Cap, P13,LFN 2004 “Qualified Institutional Investor” Institutional purchasers of securities, including Fund Managers, Pension Fund Administrators, Insurance Companies, Investment/Unit Trusts, Multilateral and Bilateral Institutions, Registered and/or Verifiable PE funds and Hedge Funds, Market Makers, Staff Schemes, Trustees/Custodians, Stock Broking Firms “Record Date” The date on which the list of holders of the Bonds is extracted from the register for the purposes of making coupon payments “Register” The Register maintained by the Registrar detailing the particulars of Bondholders and respective Bonds held by each Bondholder “Registered Bank” Any Bank in Nigeria Licensed by the Central Bank of Nigeria “RTGS” Real Time Gross Settlement. Funds transfer systems where transfer of money or securities takes place from one bank to another on a "real time" and on "gross" basis “SEC” or “The Commission” Securities & Exchange Commission “Senior Bonds” Bonds that rank pari passu without any preference of one above the other by reason of priority of date of issue, currency of payment or otherwise with all other senior unsecured obligations of the Company, present and future, except to the extent that any such obligations are by their terms expressed to be subordinated in right of payment. “Series” Each tranche of the Bond being issued. “Settlement Date” The date by which the buyer must pay for the Bonds delivered by the seller. “Shelf Prospectus” This Prospectus that Nahcoaviance has filed in accordance with the Rules and Regulations of the SEC, which contains details of the Debt Issuance Programme “The Company” Nigerian Aviation Handling Company Plc. 5 2. DEFINITION OF TERMS
“The Constitution” The Constitution of the Federal Republic of Nigeria 1999 “The NSE” or “The Exchange” The Nigerian Stock Exchange “The Registrar” CSL Registrars Limited “Trust Deed” The Deed by which the bonds will be constituted “Trustees” First Trustees Nigeria Limited
6 3. NOTICE TO PROSPECTIVE INVESTORS
This Shelf Prospectus has been prepared by Chapel Hill, FCMB Capital Markets, Stanbic IBTC, Greenwich Trust, GTI Capital and Iroko Capital in connection with the N5,000,000,000 Bond Issuance Programme of Nigerian Aviation Handling Company Plc (pursuant to which Nigerian Aviation Handling Company Plc will issue Instruments with maturities of five years and longer) for the purpose of giving information to prospective investors in respect of the Instruments described herein. The SEC will only register the Instruments as they are issued under each tranche.
This Shelf Prospectus includes certain statements, estimates and projections with respect to the future performance of the Nigerian Aviation Handling Company Plc. These statements, estimates and projections reflect various assumptions by Nahcoaviance concerning its anticipated development and expansion programme, which have been included solely for illustrative purposes. These statements, estimates and projections should not however, be relied upon as a representation, warranty or undertaking, expressed or implied, as to the future performance of Nahcoaviance and actual occurrences may vary materially from the projected developments contained herein and/or the assumptions on which such statements, estimates and projections were based.
The receipt of this Prospectus or any information contained in it or supplied with it or subsequently communicated to any person does not constitute investment advice from Chapel Hill, FCMB Capital Markets, Stanbic IBTC, Greenwich Trust, GTI Capital and Iroko Capital to any prospective investor. Each prospective investor should make their own independent assessment of the merits or otherwise of subscribing for the securities offered herein and should take their own professional advice in connection with any prospective investment by them.
Nahcoaviance and the members of the Board of Nahcoaviance individually and collectively accept full responsibility for the accuracy of the information contained herein and have taken reasonable care to ensure that the material facts contained herein are true and accurate in all material respects and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no material facts, the omission of which, would make any material statement herein misleading or untrue. Additional information may be obtained through the offices of the Issuing Houses as listed on page 9 of this Prospectus on any Business Day during the period of the respective opening and closing dates of the issuance of Instruments under the Bond issuance Programme, provided the Joint Issuing Houses possess such information or can acquire it without unreasonable effort or expense.
7 4. DECLARATIONS
A copy of this Prospectus and the documents specified herein have been delivered to the SEC for clearance and registration.
This Prospectus is being issued in compliance with the provisions of the ISA, the Rules and Regulations of The Commission and the listing requirements of The NSE and contains particulars in compliance with the requirements of SEC and The NSE, for the purpose of giving information to the public with regards to the N5 Billion Bond issuance Programme by Nahcoaviance. An application has been made to The Council of The NSE for the admission to its Daily Official List of all Series of the Bonds to be issued.
The Directors of Nahcoaviance have taken all reasonable care to ensure that the information concerning the Company contained in this Prospectus is true and accurate in all material respects on the date of this Prospectus and that as of the date hereof there are no other material facts in relation to the Company the omission of which would make misleading any statement herein, whether in fact or opinion.
LEAD ISSUING HOUSE
RC 622258 JOINT ISSUING HOUSES
RC 125097
RC 312299 RC 189502 RC 873198
on behalf of NIGERIAN AVIATION HANDLING COMPANY PLC are authorised to receive applications for the N5,000,000,000 Bond Issuance Programme Payable in full on Application
This Prospectus has been registered with SEC. The registration of this Prospectus and any subsequent Supplementary Shelf Prospectus/Pricing Supplement shall not be taken to indicate that SEC endorses or recommends the Bonds described herein or assumes responsibility for the correctness of any statements made or opinions or reports expressed herein. This Prospectus must be read in conjunction with any Supplementary Shelf Prospectus/Pricing Supplement to be issued by the Company from time to time within the validity of the Prospectus. No Bonds will be issued on the basis of this Prospectus read together with any Supplementary Shelf Prospectus/Pricing Supplement later than two years after the issue date indicated on the cover of this Prospectus. This Shelf Prospectus contains 1. on page 31 a Reporting Accountant‟s report prepared by KPMG Professional Services; 2. an attached appendix detailing claims and litigation commenced against the Company during the twelve calendar months immediately preceding the date of filing an application with SEC for the registration of this Prospectus.
This Shelf Prospectus is valid until [.]
8 5. PARTIES TO THE OFFER
ISSUER Nigerian Aviation Handling Company Plc Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
DIRECTORS OF THE ISSUER Senator Ike O.S. Nwachukwu (Chairman) Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Alhaji Suleiman Yahyah (Vice Chairman) Nahcoaviance house Murtala Muhammed International Airport Ikeja Lagos
Mr. Kayode Ojo (Managing Director) Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Mr. Bolaji Balogun Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Arc. Usman A. Bello Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Mr. Ian Pertie Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Mr. Wolfgang Wallmeroth Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Dr. Faruk Umar Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
9 5. PARTIES TO THE OFFER
Mr. Denis Hasdenteufel Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
Mr. Gordon Paul Gofwan Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
COMPANY SECRETARY Mrs. Folasade Ode Nahcoaviance House Murtala Muhammed International Airport Ikeja Lagos
LEAD ISSUING HOUSE/BOOK RUNNER Chapel Hill Advisory Partners Limited 45 Saka Tinubu Street (1st Floor) Victoria Island Lagos
JOINT ISSUING HOUSES/BOOK RUNNERS FCMB Capital Markets Limited First City Plaza 44 Marina Lagos Stanbic IBTC Bank PLC I.B.T.C. Place Walter Carrington Crescent Victoria Island Lagos Greenwich Trust Limited Plot 1698A Oyin Jolayemi Street Victoria Island Lagos
GTI Capital Limited 4 Tinubu Street Central Business District, Abuja Lagos
Iroko Capital Limited 4B Olayinka Omololu Close Victoria Island Lagos
10 5. PARTIES TO THE OFFER
LEAD STOCKBROKER TO THE OFFER Marina Securities Limited 10 Amodu Ojikutu Street Victoria Island Lagos
JOINT STOCKBROKERS TO THE OFFER Compass Investments & Securities Limited Stock Exchange House (14th Floor) 2/4 Customs Street Lagos
Stanwal Securities Limited Stock Exchange House (14th Floor) 2/4 Customs Street Lagos
Yuderb Investments & Securities Limited 3/7 Kakawa Street Lagos
TIDDO Securities Limited Labour/NSITF House (1st Floor, Left Wing) Central Business District Abuja
TRUSTEES First Trustees Nigeria Limited A.G. Leventis Building (2nd Floor) 42/43 Marina Lagos
AUDITORS Horwath Dafinone CEDDI Towers 16 Wharf Road Apapa Lagos
REPORTING ACCOUNTANTS KPMG Professional Services 22 Gerrard Road Ikoyi Lagos
RATING AGENCIES Global Credit Rating Co New Africa House (17th Floor) 31 Marina Lagos
Agusto & Co 5th Floor UBA House Marina Lagos SOLICITORS TO THE ISSUER David Mando & Co D3, Bobsar Complex Ahamadu Bello Way Garki Abuja 11 5. PARTIES TO THE OFFER
SOLICITORS TO THE TRUSTEES Ahmed Uwais & Co Metro Plaza, Annex B Suite 1, First Floor Plot 991/ 992 Makariya Maimalari Street Abuja
SOLICITORS TO THE OFFER Banwo & Ighodalo 98 Awolowo Road South-West Ikoyi Lagos
REGISTRARS CSL Registrars Limited Primrose Tower 17A Tinubu Street Lagos
RECEIVING BANK Stanbic IBTC Bank PLC I.B.T.C. Place Walter Carrington Crescent Victoria Island Lagos
12 6. PARTICULARS OF THE PROGRAMME
6.1 SUMMARY OF TERMS & CONDITIONS OF THE PROGRAMME
The following summary does not purport to be complete and is taken from, and qualified in its entirety by the remainder of this Shelf Prospectus and, in relation to the terms and conditions of any particular Tranche of Bonds, the applicable Pricing Supplement/ Supplementary Shelf Prospectus. Words and expressions defined in „„Form of the Bonds‟‟ and „„Terms and Conditions of the Bonds‟‟ shall have the same meaning in this summary:
ISSUER Nahcoaviance
LEAD FINANCIAL Chapel Hill Advisory Partners Limited ADVISER/ISSUING HOUSE: JOINT FINANCIAL FCMB Capital Markets Limited ADVISERS/ISSUING HOUSES: Stanbic IBTC Bank Plc Greenwich Trust Limited GTI Capital Limited Iroko Capital Limited
ISSUING AND PAYING AGENT: Lead Issuing House, Joint Issuing Houses and/or such other agent(s) as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus
REGISTRAR: CSL Registrars and/or such other registrar as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus
LISTING AGENT: The NSE and/or such other agent as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus
PROGRAMME AMOUNT: Up to N5,000,000,000
AVAILABILITY: The Programme will be continuously available during the period of validity of this Prospectus.
METHODS OF ISSUE: Bonds under this Programme may be issued via a Book Building, Public Offering, Private Placement and/or any other such methods as described in the Pricing Supplement/ Supplementary Shelf Prospectus and approved by SEC.
INTEREST RATES: Bonds may be interest-bearing or non-interest bearing. Interest (if any) may be at a fixed or floating rate and may vary during the lifetime of the relevant Series
USE OF PROCEEDS Use of Proceeds Amount % Duration Procurement of Equipment 38 3-6 months Acquisition of Ground Handling Assets 30 18 months Refinancing/Repayment of 3 months existing bridge facilities 20 Building of additional warehouse 6 3 months ICT and Working Capital needs 6 12months
13 6. PARTICULARS OF THE PROGRAMME
VARIABLE COUPON AMOUNT The Pricing Supplement/ Supplementary Shelf Prospectus issued in respect BONDS: of each issue of Variable Coupon Amount Bonds will specify the basis for calculating the amounts of interest payable, which may be by reference to a variety of financial instruments, a currency exchange rate or any other index or formula or as otherwise provided in the relevant Pricing Supplement/ Supplementary Shelf Prospectus.
CURRENCIES: Bonds will be denominated in Nigerian Naira or such currency or currency units as may be agreed among the Company, the relevant Dealer(s) and the Issuing and Paying Agent, subject to compliance with all applicable legal or regulatory requirements.
STATUS OF THE BONDS: The Programme allows for issuance of various types of Instruments that can be classified as Senior or Subordinated, in either case as described in the relevant Supplementary Shelf Prospectus.
The Senior Bonds will rank pari passu without any preference to one above the other by reason of priority of date of issue, currency of payment or otherwise with all other senior unsecured obligations of the Company, present and future, except to the extent that any such obligations are by their terms expressed to be subordinated in right of payment.
RATINGS: The Bonds issued under this Programme will be rated by one or more ratings agencies at the instance of the issuer. The Rating Report will be set out in the relevant Pricing Supplement/ Supplementary Shelf Prospectus.
EVENTS OF DEFAULT: The events of default under the Bonds are as specified within the Trust Deeds.
FORM OF THE BONDS: No definitive Bonds will be issued. The issue and ownership of the Bonds will be effected and evidenced by the Particulars of the Bond upon being entered in the Register by the Registrar.
ISSUE PRICE: Bonds may be issued at par or at a discount or premium to par.
MATURITY OF BONDS: Bonds may be issued with such maturities as may be agreed with the Issuer and as indicated in the applicable Pricing Supplement/ Supplementary Shelf Prospectus, subject to such minimum or maximum maturities as may be allowed or required from time to time by the Issuer or any laws or regulations applicable to the Issuer or the relevant specified currency.
DENOMINATIONS: Bonds will be issued in such denominations as may be agreed between the Company and the relevant Dealer and as specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus, subject to compliance with all applicable legal and regulatory requirements, and in accordance with usual market practice. EARLY REDEMPTION: Early redemption will be permitted only to the extent specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus and then only subject to any applicable legal or regulatory limitations.
REDEMPTION: Bonds may be redeemable at par or at such other redemption amount as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus
14 6. PARTICULARS OF THE PROGRAMME
GOVERNING LAW: The Bonds and all related contractual documentation will be governed by, and construed in accordance with Nigerian law
LISTING Each Series of Bonds may be listed on The NSE and/or admitted to listing, trading and/or quotation by any other listing authority, stock exchange and/or quotation system as may be agreed between the Company and the relevant Dealer or they may be unlisted, as specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus.
TERMS AND CONDITIONS: The terms and conditions applicable to each Series (the “Terms and Conditions”) will be agreed between the Company and the relevant Dealer or other purchaser at or prior to the time of issuance of such Series, and will be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus. The Terms and Conditions applicable to each Series will therefore be those set out on pages 15 to 20 hereof as supplemented, modified or replaced by the relevant Pricing Supplement/ Supplementary Shelf Prospectus.
PLACEMENT COMMISSION: Placement of Bonds under the Programme will be subject to a placement commission payable to the placing agent.
TRADING RESTRICTIONS: The parties dealing the Bonds have undertaken to comply with the relevant, Nigerian Law as provided and all other applicable trading restrictions. Further restrictions may be required in connection with any particular Tranche of Bonds and will be specified in the documentation relating to such Tranche
BOND TRADING & LIQUIDITY: Bonds may be traded OTC between banks and qualified market counterparties. Dealers will be obliged to quote two-way prices for the Bonds and satisfy additional terms specified on the NSE Floor
OTHER CONDITIONS: Such other Terms and Conditions as may be incorporated by reference to, modified by, or supplemented by applicable Pricing Supplement/ Supplementary Shelf Prospectus for the Issue.
15 6. PARTICULARS OF THE PROGRAMME
6.2 TERMS & CONDITIONS OF THE BONDS
The following are the Terms and Conditions of the Bonds issued under the Programme which (subject to completion and amendment) will be applicable to each Series of Bonds provided that the relevant Pricing Supplement/ Supplementary Shelf Prospectus in relation to any Series of Bonds may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these terms and conditions, replace the following Terms and Conditions for the purposes of such Series of Bonds.
The provisions of these Terms and Conditions of the Bonds which are generally applicable to the Bonds issued under the Programme shall be deemed to be completed by the information contained in the relevant Pricing Supplement/ Supplementary Shelf Prospectus. Any provision in the Pricing Supplement/ Supplementary Shelf Prospectus modifying, supplementing or replacing, in whole or in part, the provisions of these Terms and Conditions shall be deemed to so modify, supplement or replace, in whole or in part, the provisions of these Terms and Conditions.
1. Form and Description
1.1. The Bonds The Bonds are constituted by a Programme Trust Deed (the “Trust Deed”) dated [June [.], 2011] between Nahcoaviance (“the Issuer”) of the first part and First Trustees Nigeria Limited (the “Trustee”) which expression shall include all persons for the time being the trustee or trustees under the Trust Deed of the other part.
Any Tranche of Bonds which is to be created and issued pursuant to the Programme Trust Deed shall be constituted by, be subject to and have the benefit of a Series Trust Deed (the “Series Trust Deed”) between the Issuer and the Trustees. The Issuer shall execute and deliver such Series Trust Deed to the Trustees containing such provision (whether or not corresponding to any of the provisions contained in the Programme Trust Deed) as the Trustees may require. Each Series Trust Deed shall set out the form of the Tranche of Bonds to be so constituted thereby and shall be accompanied by legal opinions (in form and substance satisfactory to the Trustees) or supporting authorizations/approvals as may be required by the Trustees.
The Bonds will be issued in registered form and issued in series (each “a Series‟‟), and each Series will be the subject of a Pricing Supplement/ Supplementary Shelf Prospectus prepared by or on behalf of the Company, the terms set forth in which may supplement or vary any of these Conditions. A copy of each Pricing Supplement/ Supplementary Shelf Prospectus will be available at the specified office of each of the Paying Agents or at the specified office of the Registrar, in the case of Bonds that form part of a Series of Registered Bonds. A copy of the Pricing Supplement/ Supplementary Shelf Prospectus will be lodged with The NSE in the case of Bonds to be listed on the NSE.
1.2. Description The Bonds are denominated in Nigerian Naira or such currency as may be agreed among the Company, the relevant Dealer (s) and Issuing and Paying Agent subject to compliance with the applicable legal and regulatory requirements and as specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus, with coupons paid (if any) semi-annually in arrears. Bonds may be issued from time to time, subject to the applicable terms of this Shelf Prospectus, an offer for subscription or private placement, through a book building process and/or any other such methods as described in the Pricing Supplement/ Supplementary Shelf Prospectus. Unless otherwise specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus, the Bonds are redeemable at face value on maturity.
2. Events of default The events of default under the Bonds are as specified within the Trust Deed.
16 6. PARTICULARS OF THE PROGRAMME
3. Certificates of Title On application by any Bondholder, the Registrar will issue to the Bondholder a certificate of title certifying that the Bondholder is the registered holder of the principal of Bonds as referred to therein.
The certificate of title will be evidence of the ownership of the Bonds to which it relates by the person named therein as the Bondholder.
The transfer, whether by delivery or otherwise, of any such certificate of title will not operate as a transfer of the legal interest of the Bondholder in the Bonds to which it relates. Any transfer of Bonds must be in such form as the Registrar prescribes and in accordance with the relevant section of this Shelf Prospectus.
The Registrar will enter in the Register particulars of the issue of every certificate of title to Bonds. The entries in the Register shall in the absence of manifest error, be conclusive evidence of the facts, matters and transactions contained therein.
The Registrar will not record any dealing and the Company will not repay any Bonds until the certificate of title has been cancelled.
Where any certificate of title to Bonds has been lost, destroyed, mutilated or rendered illegible, the Registrar, on receiving evidence to its satisfaction of the loss or destruction or, as the case may be, on the surrender of the mutilated or illegible certificate of title, may on such terms and subject to such conditions as the Registrar prescribes, issue a substitute certificate of title with the word “substitute” stamped or written thereon and will record the issue thereof in the Register.
Every such substitute certificate of title will have the same effect, to all intents and purposes, as the original certificate of title for which it was substituted.
4. Repayments Bonds are domiciled for repayment in Nigeria and will be repaid to the Bondholder registered on the Record Date immediately prior to the Maturity Date by crediting an account at any registered bank in Nigeria. If a bank account has not been provided, the Principal will be repaid by the issuance of warrant. No additional interest will be paid on any amounts in respect of which a warrant is issued.
In the case where Bonds are held through CSCS, principal repayments will be credited to the cash account of the participants as specified on the application form.
The Registrar will accept instructions prior to the Record Date from Bondholders in regard to repayment of the Bonds.
Payment will be made on the Maturity Date but, if the Maturity Date is not a Business Day, payment will be made on the next succeeding Business Day without payment of additional interest. Bonds are not repayable prior to the Maturity Date.
5. Status of the Bonds The Bonds will be issued as Senior Bonds, and will be direct, secured and unconditional obligations of the Issuer and shall rank pari passu among themselves and equally with all other existing obligations of the Issuer. The Bonds qualify as securities in which trustees may invest under the Trustees Investments Act Cap. T22 Laws of the Federation of Nigeria 2004. The Bonds also qualify as securities in which PFA‟s may invest pension fund assets under Pension Reforms Act and the Regulations on Investment of Pension Fund assets issued by the National Pension Commission.
6. Changes in Agent The Company reserves the right to appoint any other person as its Issuing House or Registrar or Paying Agent subject to prior approval from the SEC. In such circumstances, Bondholders will be advised at the relevant time. 17 6. PARTICULARS OF THE PROGRAMME
7. Bondholder’s Protection The Company has appointed First Trustees Limited to act as Trustee for the Bondholders. The Company and the Trustees will enter into a Trustee Deed, inter alia, specifying the powers, authorities and obligations of the Trustees and the Company. The Bondholder(s) shall, without further act or deed, be deemed to have irrevocably given their consent to the Trustees or any of their agents or authorized officials to do all such acts, deeds, matters and things in respect of or relating to the Bonds as the Trustees may in their absolute discretion deem necessary or require to be done in the interest of the Bondholder(s). Any payment made by the Company to the Trustees on behalf of the Bondholder(s) shall discharge the Company pro tanto to the Bondholder(s). The Trustees will protect the interest of the Bondholders in the event of default by the Company in regard to timely payment of interest and repayment of principal and they will take necessary action at the cost of the Company and shall also ensure that remittances are made in strict compliance with the Trust Deed.
8. Redemption
8.1. Optional Early Redemption (Put) If the relevant Pricing Supplement/ Supplementary Shelf Prospectus so specifies, the Company shall, upon the exercise of the relevant option by the Holder of any Bond of the relevant Series, redeem such Bond on the date or the next of the dates specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus at its principal amount (or such other redemption amount as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus), together with accrued interest (if any) thereon. In order to exercise such option, the Holder must, not less than forty-five days before the date so specified (or such other period as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus), deposit the relevant Bond (together, in the case of an interest-bearing Definitive Bond, with any unexpired coupons appertaining thereto) with the Registrar together with a duly completed redemption notice in the form which is available from the specified office of any of the Paying Agents or, as the case may be, the Registrar.
8.2. Optional Early Redemption (Call) If the relevant Pricing Supplement/ Supplementary Shelf Prospectus so specifies, then the Company may, upon the expiry of the appropriate notice and subject to such conditions as may be specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus, redeem all (but not, unless and to the extent that the relevant Pricing Supplement/ Supplementary Shelf Prospectus specifies otherwise, some only), of the Bonds of the relevant Series on the date specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus and shall not exceed the N5,000,000,000 approved by the shareholders
9. Allotment and Subscription
9.1. Allotment Allotment of Bonds in respect of successful bids for each maturity will be made in ascending order of yields bid. At the highest yield accepted, Bonds will, if necessary, be allotted as far as practicable on a pro-rata basis in relation to the amount available at that yield, except that successful bidders shall be allotted an amount that is an exact multiple of the Principal with the minimum allotment being the amount specified.
9.2. Oversubscription In the event that the number of bidders at the highest acceptable yield exceeds the amount of Bonds available at that yield per tranche, the Company may either increase the amount available up to 15% on that particular tranche so that a minimum number of Bonds can be issued on a pro-rata basis to each successful bidder at that yield, or decrease the amount available so that no allocation of Bonds is made at that yield; provided however that where the Company increases the amount available this will be subject to 15% of the offer size (or such amounts as permitted by the SEC) and shall not exceed the N5,000,000,000 approved by the shareholders
18 6. PARTICULARS OF THE PROGRAMME
9.3. Under-issuance The Company reserves the right to issue less than the full amount of Bonds offered in any tender where the offer is over-subscribed.
10. Registration, Settlement and Transfer
10.1. Settlement Price The settlement price will be rounded to the nearest Naira (to [1/100th] of a Naira being rounded down and to [1/100th] of a Naira being rounded up). Settlements during the period from the Record Date up to, but not including, the Coupon Payment Date of any Bonds offered for tender will be on an ex-coupon interest basis. All other settlements will be on a cum-coupon interest basis.
10.2. Settlement
Bidders must fully pay for the Bonds allotted to them on the Settlement Date. For any Bonds not fully paid for by a successful bidder after the expiry of the Settlement Date:
- the Company reserves the right to cancel those Bonds; or - the Issuing Agent reserves the right to take up those Bonds.
10.3. Registration of Bonds Bonds may be held by individual persons with right of survivorship. Organizations or trusts which are not incorporated should complete their application in the full name(s) of the trustee(s). No notice of any trust in respect of any Bonds will be entered in the Register or receivable by the Registrar. Each Bondholder is to be regarded as the absolute beneficial owner of the Bonds registered in its name and Company and the Registrar shall not be affected by any trust or other equity affecting any Bond, whether or not it is aware of the same.
If two or more persons apply to be registered as Bondholders as tenants in common, the Registrar may, after receiving an application from either Person and notifying the other Person(s) of its intentions to do so, divide the Bonds into the share for which each Person is expressed to be entitled and register each Person as the holder of the Bonds representing the Person‟s share. If the Bonds cannot be shared where the minimum is 10,000 and a multiple of 5,000 the Registrar may refuse to accept the application.
10.4. Notices of Registration/Transfer
a. Register The Registrar shall enter in the Register the following particulars of every holder of Bonds: - Name and address of the Bondholder; - Principal of the Bonds held; - Coupon Interest Rate payable on the Bonds; - Coupon Payment Dates of the Bonds; - Maturity Date of the Bonds; - Such other particulars as may, from time to time, be required by the Company; and - Such other particulars as may, from time to time, be considered necessary by the Registrar. The Registrar may correct errors and remedy omissions in the Register and may call in any outstanding certificates of title for that purpose.
19 6. PARTICULARS OF THE PROGRAMME
b. Transfer of Bonds The Bondholder may, by way of a form of transfer in such form as the Registrar prescribes, transfer to any other person all or any of the Bonds of which it is the holder. Transfers must be in multiples of 5,000 and no transfer may be made if, as a result thereof, the Principal of the Bonds Registered in the name of the transferor or the transferee would be less than N5,000,000.
On production to the Registrar of a duly executed form of transfer accompanied by the certificates of title (if issued) and such other evidence as the Registrar may require to prove the authority of the persons signing the same to sign on behalf of the transferor, the Registrar will enter in the Register the name of the transferee as the registered holder of the Bonds to which the form of transfer relates.
When the right to any Bond is acquired by any person in any manner other than by a form of transfer, the Registrar, on application by or on behalf of the person entitled, and on being satisfied that the person is entitled to be registered as the Bondholder, will enter the person in the Register as the holder of the Bonds.
Upon registration of a form of transfer or other assignment on the Register, the transferee will be recognized as entitled to the Bonds.
No transfer will be registered in the period from the Record Date immediately prior to the Maturity Date, to the Maturity Date.
11. Certification of Transfers (Markings) The Registrar may, on the application of a Bondholder, certify on a form of transfer of Bonds that the person named therein as transferor is entered on the Register as the Bondholder. Any such certification may be subject to such conditions as the Registrar prescribes.
Where a form of transfer of Bonds has been certified under this section, the Registrar may refuse to record any dealing with the Bonds until the form has been produced to it and the certification thereon cancelled, or the certification has expired by virtue of its conditions, or the Bonds have matured. The Registrar will enter in the Register particulars of every form of transfer certified under this section.
12. Method of Payments of Coupon Bonds will bear Coupon on their respective principals at the Coupon Rate specified for each issue. Coupon Rates may be fixed, floating, variable or index-linked with respect to an interest or exchange rate. Subject to the terms of each Bond Issue, Coupon is payable semi-annually (half the annual amount) in arrears on each Coupon Payment Date up to and including the Maturity Date whereupon Coupon will cease to accrue on the Bonds.
The first Coupon payment will be for a full semi-annual period and will be payable on the Coupon Payment Date following issuance. However, if issuance is in the period from the Record Date up to, but not including, the Coupon Payment Date, the payment (which will only be for a full semi-annual period) will be made on the next succeeding Coupon Payment Date.
Coupon payments are domiciled for payment in Nigeria and will be paid to the Bondholder registered on the Record Date by crediting an account in Nigeria or issuing warrants. If a bank account has not been provided, Coupon will be paid by the issuance of a warrant by the Registrars. No additional interest will be paid on any amounts in respect of which a warrant is issued. In the case where Bonds are held through CSCS, coupon will be credited to the respective account of the participant as specified on the application form. The Registrar will accept instructions prior to the Record Date from Bondholders with regard to payment of Coupon. If the Coupon Payment Date is not a Business Day, payment will be made on the next succeeding Business Day without payment of additional interest.
Coupon will cease to accrue on the Bonds on the Maturity Date.
20 6. PARTICULARS OF THE PROGRAMME
If Zero Coupon Bonds are to be issued, the relevant Pricing Supplement/ Supplementary Shelf Prospectus will set out the applicable provisions.
13. Purchase, Cancellation and Further Issues The Company may at any time offer to purchase, beneficially, Bonds from any Person. Any Bonds so purchased may be retained, sold or cancelled at the discretion of the Company.
The Company reserves the right to issue Bonds with the same Maturity Date and Coupon Rate as any other Bonds already on issue, from time to time and whether by Invitation to Tender or otherwise.
14. Payments for Bonds Investors will be required to pay for bonds in the currency specified in the relevant Pricing Supplement/ Supplementary Shelf Prospectus. Each Issuing House may, under certain terms and conditions, arrange for the conversion of the investors‟ currency into the specified currency to enable investors to pay for the bonds in the specified currency. Each such conversion will be made by such Issuing House on such terms and subject to such conditions, limitations and charges as such Issuing House may from time to time establish in accordance with its regular foreign exchange practices, and subject to any applicable laws and regulations. All costs of conversion will be borne by such investors.
6.3 TAX CONSIDERATIONS
Under current legislations in Nigeria, the tax consequences of an investment in the Bonds proposed to be issued under the Programme are quite broad and expansive. However, as is presently applicable to this proposed issuance, new tax rules that have recently been promulgated will have a major effect of the taxation of the bonds. The taxation landscape in the country with regards to debt securities, and more particularly as it relates to Bonds, is currently undergoing a major overhaul with the first major official announcement made on 16 March 2010, by the then Acting President of Nigeria, in exercise of his statutory powers.
The announcement approved a waiver of taxes on all categories of bonds and short term Federal Government securities. The taxes covered by the approval are taxes prescribed pursuant to the Companies Income Tax Act, Personal Income Tax Act, Value Added Tax Act and the Capital Gains Tax Act with the aim of eradicating the copious amounts of tax payable on such investments. Whilst this approval has been granted in principle, it is yet to be gazette as required by law and as such, it is as yet of no legal effect.
The summary is not intended to be, and should not be construed to be tax advice to any particular subscriber. Any prospective investor who is in any doubt as to his/her tax position or who is subject to taxation in any jurisdiction other than Nigeria should consult his/her own professional advisers without delay as to the consequences of an investment in the Bonds in view of his/her own circumstances. Neither the Issuer nor its tax advisers shall be liable to any subscriber in any manner for placing reliance upon the contents of this section.
21 7. INDUSTRY OVERVIEW
7.1 INTRODUCTION TO NIGERIAN AVIATION INDUSTRY
The aviation industry is one of the key sectors of the Nigerian economy. The industry continues to expand yearly, with the addition of both local and international players. The industry is also on the pathway of reaching the coveted category one status.
Ground Handling in aviation terms refers to the many service requirements of an aircraft while it is on ground, between the time it arrives and the time it departs on its next flight, to ensure the safe and smooth processing of passengers, baggage, cargo, mail and other materials associated with air transportation. There are three categories of ground handling, namely, Ramp Handling, Passenger/Baggage Handling and Cargo and Mail Handling. Ramp handling refers to services provided on the ramp, which includes loading and load control and the provision of ground equipment. Passenger/Baggage handling refers to the documentation and checking in of passengers and their luggage, this also deals with tracking and retrieval of baggage. Cargo and mail handling refers to the storage and warehousing of goods.
In recent years, the Nigerian aviation authority, in conjunction with market participants, have improved on air transport facilities and safety, however, there are still many areas of development in the industry, such as: airport security, baggage protection, corruption and debt. For example, in 2009, Belleview, Capital and Afrijet, stopped operations, due to their inability to service their huge debt, reducing domestic airlines in the country to eight. In order to improve efficiency in the industry one of the key areas which aviation must look at is the Aviation Handling Industry.
7.2 HISTORY OF THE NIGERIAN GROUND HANDLING INDUSTRY
Handling activities in Nigeria dates back to the late 1940s, where at the time, the Nigerian Airways handled foreign airlines in the country as a matter of responsibility. It was very well equipped with adequate machinery and skilled personnel. However, due to the absence of competitive pressures and the fact that the airline was neither commercialized nor detached from bureaucratic management, the airline began to deteriorate in handling services between 1970 and 1980. Consequently, this caused unsatisfactory performance by the Nigerian Airways. Airlines began to partake in “self handling” to various degrees. In a bid to revitalize the aviation industry the government via Federal Airports Authority of Nigeria (FAAN) established the Nigerian Aviation Handling Company (NAHCO) on April 1, 1979 as the first specialized handling company in the country. In 1999, the Nigerian Airways decided to upgrade its ground handling by employing an autonomous, commercial ground handler called Skypower Aviation Handling Company Limited (SAHCOL) to enhance the quality of ground handling services. Government shielded these two semi-governmental agencies by issuing regulations like the Civil Aviation Policy 2001 which enabled them to act as a duopoly, eliminating any other poor handling services. In 2006, the government decided to fully licence two other qualified private organizations, Swiss Port and Precision Aviation Handling Company Ltd (PAHCOL). The intention was to create a competitive environment, subsequently creating cheaper and better services, alongside bringing in private sector initiatives. In the last two years NAHCO and SAHCOL have been privatized in order to help meet the challenges of the era.
7.3 MERITS OF PRIVATIZATION IN THE GROUND HANDLING INDUSTRY
These developments are expected not only to aid airport development but also aviation development in the country. NAHCO and SAHCOL concentrated on the larger airports out of 22 airports and were only able to effectively cover eight between them. Smaller airports such as Akure, Ibadan, Ilorin etc, still lack handling equipment and facilities therefore causing airlines not to operate there. Private companies will no doubt look at these as opportunities and thus create increased aviation activities in smaller airports, causing increased revenue to government agencies like Nigerian Civil Aviation Authority (NCAA) and FAAN. An increased job opportunity for the local inhabitants of these areas is one advantage that stems from privatization. Additionally, there will be easier connectivity for people as they will no longer need to go to the larger airports for connection flights. Airlines are sure to fare much better with assurance of adequate handling facilities. 7.4 AIRPORT TARIFFS
22 7. INDUSTRY OVERVIEW
A major factor that has to be observed are the tariffs at the airport. Airlines have been subject to high airport tariffs in the form of parking taxes, handling charges, parking fees etc. The agencies must therefore look for ways to reduce these in the overall interest of aviation development in the country. For example, in the area of handling charges, there should be a difference in pricing for domestic and international flight, as the workload of international flights is much more than that of a domestic flight for the same category of aircraft and number of passengers. The tariffs on the domestic scene has been anything but realistic, but now that the government has removed monopolistic tendencies that initially prevented competition, there is bound to be better pricing of services for a guaranteed improvement in the quality of such services.
7.5 CONCLUSION
The Government has done well in its recent shift to allow private sector participation in the handling business. Over the last 30 years things should have happened which did not. Only now are essential materials such as baggage dollies and containers being imported. Hopefully, this should be a thing of the past with new players in the field having a different orientation to the entire handling business. Nevertheless, the various players must work together to make these objectives realizable in the overall interest of the growth and development of the aviation industry in Nigeria.
23
8. NIGERIAN AVIATION HANDLING COMPANY PLC
8.1 HISTORY AND OVERVIEW OF THE BUSINESS
The Nigerian Aviation Handling Company Plc („‟Nahco‟‟, „‟Nahcoaviance‟‟ or „‟the Company‟‟) is Nigeria‟s foremost aviation ground handling Company, providing specialised and differentiated services to 33 leading domestic and international airlines operating in Nigeria involving aircraft, passengers and cargo.
Nahco was privatised in August 2005 in response to the privatisation policy of the Federal Government of Nigeria. Prior to privatisation, approximately 60% of the Company - comprising of 180 million ordinary shares - were held by the Federal Airports Authority of Nigeria (FAAN) on behalf of the Federal Government. These shares were consequently offered for sale to the public by the Bureau for Public Enterprises through an Initial Public Offer which was very successful. The Company‟s shares were listed on the Floor of The Nigerian Stock Exchange on November 27, 2006.
The Company has a diverse shareholder base which comprises of –
Name % Holding Nigerian Shareholders 68.00 British Airways 10.70 Rosehill Group Nigeria Limited 9.50 Lufthansa 6.00 Air France 5.80 100.00
In September 2009, the Company adopted a new brand name – Nahcoaviance – a significant milestone in the re- branding process which began in 2006; although the Company‟s corporate identity remains „Nahco‟. The brand name Nahcoaviance is symbolic of the Company‟s membership of Aviation Alliance, the first global alliance of airport service providers around the world. Aviation Alliance has 13 members who operate in 20 countries; serve 126 airports; employ 28,900 people; facilitate travel for 180million passengers annually; and handle 1887 kilotons of cargo. Nahco‟s membership of the alliance will enable the Company access market intelligence, leverage and enhanced branding, undertake joint marketing, cross selling and common purchasing, pool equipment, as well as provide opportunities for joint venture. Nahco is the only Nigerian member of the Alliance, and admittance that followed a successful audit of the Company‟s operations.
In addition to providing services to its shareholders (indicated above), the Company also has the patronage of a number of the international airlines operating in Nigeria including Virgin Atlantic, Virgin Nigeria, Emirates Airlines, Qatar Airways, Turkish Airlines, South African Airlines, Royal Air Maroc, Kenyan Airways, Ethiopian Airways, Dana Air and Aero Contractors.
8.2 BUSINESS ACTIVITIES
The Company‟s business activities are comprised of the following:
. Aircraft and Passenger Handling
Nahcoaviance provides specialised and differentiated aircraft handling and passenger facilitation services to 24 (Twenty-Four) foreign and 8 (eight) domestic airlines, representing approximately 85% and 40% of the Nigerian international and domestic market share, respectively. These services are provided through the Company‟s seven stations located at Murtala Muhammed International Airport (Lagos), Murtala Muhammed Airport 2 (MM2, Lagos), Nnamdi Azikiwe International Airport (Abuja), Port Harcourt International Airport (Port Harcourt), Mallam Aminu Kano International Airport (Kano), Kaduna Airport (Kaduna) and Yakubu Gowon
24 8. NIGERIAN AVIATION HANDLING COMPANY PLC
Airport (Jos). In providing aircraft and passenger services, the Company highlights the safety and comfort of passengers, while also ensuring that delays are minimised where they cannot be totally eradicated. The specific services that Nahcoaviance renders through its aircraft and passenger handling operations, during the departure and arrival of flights, include the following.
Flight departure:
. Passenger check in, baggage weighing and issuance of boarding pass . Baggage loading (into the aircraft) . Pre-boarding and boarding activities including special assistance to physically challenged passengers. . Aircraft load control and weight balancing. . Provision of passenger step. . Provision of ground power and Air conditioning Units. . Aircraft push back in readiness for take off.
Flight Arrival
. Positioning of passenger step. . Baggage Unloading. . Cleaning of the aircraft, including removal of water and waste
The Company continues to grow revenues from aircraft and passenger activities, as the operator of choice. In 2009, Nahcoaviance handled 35,328 flights compared to 19,928 in 2008, a 77% increase; and passenger handling grew 15% from 2.7 million (2008) to 3.1 million (2009).
. Cargo Handling
Cargo handling, processing and facilitation dominate Nahco‟s business. This service is provided to a range of clientele including airlines, consolidators and clearing agents. Nahco processes cargoes through Nigeria‟s largest network of customs bonded warehouses located at the International Airports in Abuja, Kano, Lagos and Port Harcourt; effectively over 85% of air cargo traffic in Nigeria. The Company utilises the Hermes Computerisation System for the documentation of import cargo procedures, which enhances cargo facilitation services as well as guarantee ease of documentation. The contribution of cargo operations to Nahcoaviance‟s business has grown consistently against a global declining trend resulting from the global melt-down. This is particularly demonstrated in the double-digit increase in the volume of cargo processed in 2009 (152, 000 tonnes) when compared with 124,000 tonnes in 2008.
8.3 DIRECTORS OF THE COMPANY
Nahco has a Board comprising of the following ten (10) distinguished persons who bring the wealth of their respective experiences to bear on the Company‟s operations -
Senator Ike O.S. Nwachukwu, CFR - Chairman Senator Ike Omar Sanda Nwachukwu, CFR joined the Nigerian Army as a regular combatant soldier and rose to the rank of Major-General before retiring in 1990. An alumnus of the National Institute of Policy and Strategic Studies (1982), Senator Nwachukwu holds an honorary Doctor of Law (LL.D) (Honoris Causa) Degree from Abia State University in 1993. He is a graduate of the Institute of Humanitarian Law, San Remo Italy (1981). Some of the institutions he attended in the course of his military training are the Royal Canadian School of Infantry of the Royal Canadian Military Academy; the Royal School of Infantry, Warminster and the United Nations Peace Academy.
Senator Nwachukwu‟s working career spans through government, education, politics and industry. He has also been on the board of several private companies including Cadbury Nigeria Plc. He is the Chairman/Chief
25 8. NIGERIAN AVIATION HANDLING COMPANY PLC
Executive Officer of Santon Group Inc. He has authored several publications on military strategic studies; social engineering, and Diplomacy, including Economic Diplomacy and My Vision and Mission for Nigeria. The Senator has a long list of national and international honours among which are Commander, Federal Republic of Nigeria (CFR); Knight Grand Cross of the Most Distinguished Order of Saint Michael and Saint George (GCMG) given by Her Majesty, Queen Elizabeth II; the Great Merit Cross with Star (GMCS) of the Merit Order of the Federal Republic of Germany; Grand Master of the National Order of the Southern Cross (GMSC), Argentina. He joined the Board of Nahcoaviance as a nominee of Rosehill Group Nigeria Limited in May 2008.
Alhaji Suleiman Yahyah - Vice Chairman Alhaji Suleiman Yahyah attended Bayero University, Kano where he graduated with a First Class Honours Degree in Economics in 1987. He also attended the prestigious Cambridge University (UK) in 1990 where he obtained a Master of Philosophy in Economics and Politics of Development. Mr. Yahyah is a financial expert with considerable experience, and has contributed immensely to the growth and development of Nigeria‟s economy.
He is an active member of numerous professional organisations in Nigeria and overseas, such as Chartered Institute of Stockbrokers, Cambridge Commonwealth Society, Investment and Securities Tribunal among others. He started his working career with Continental Merchant Bank as a Corporate Finance Supervisor in 1987. He has served on the Board of numerous organizations, including RoseCom Net, Rose Hill Group Limited, Empire Securities Limited, Talafon Telecommunications, First City Group, and NUB International.
Mr. Yahaya has many publications on Economics and Financial issues. He is currently a member of the Nigeria Economic Summit Group (NESG), Alfred Marshall Economic Society, England and Nigeria Internet Group. He was appointed to the Board of Nahcoaviance in October 2006.
Mr. Kayode Ojo – Managing Director/ Chief Executive Officer Mr. Kayode T. Ojo is an alumnus of University of Ife, graduating with a B. Sc Economics in 1985. He obtained the Institute of Chartered Accountants of Nigeria (ICAN) qualification in 1993 and was appointed member of The Chartered Institute of Bankers in 2006. Mr. Ojo is a seasoned finance professional with over 20 years experience covering structured finance, treasury and investment management, strategy and business development as well as corporate finance and business advisory services. He has been involved in several landmark transactions involving packaging and deployment of medium to long-term financing for multi- national companies operating in Nigeria.
Prior to joining Nahcoaviance in February, 2010, Mr. Ojo was General Manager, Associated Discount House Limited where he had executive oversight for corporate finance, supervising the treasury and funds management group; and also responsible for interbank dealing and trading in government securities and bills. He was later seconded to a non-bank financial services subsidiary of Associated Discount House where he served as Managing Director. Mr. Ojo has had extensive international trainings in the UK and South Africa on International Financial Markets, Fixed Income and Investment Management.
Mr. Mobolaji Balogun - Director Mr. Balogun is an Economics (Honours) graduate of the London School of Economics, University of London (1989). He is the Managing Director and Chief Executive Officer of Chapel Hill Denham Group and Managing Partner and Chief Executive Officer of Chapel Hill Advisory Partners. He has over nineteen years experience in investment banking and mobile telecommunications. He is widely regarded as one of the leading investment bankers in Nigeria having spent eleven years in investment banking division within First City Group, leaving the business in January 2001. From April 1993 to January 2001, he was Executive Director and Chief Operating Officer at CSL Stockbrokers (part of First City Group). He was Executive Director at FCMB Capital Markets where he led advisory teams in major corporate and complex transactions.
In January 2001, Mr. Balogun left FCMB Capital Markets to become a co-founder of Econet Wireless Nigeria. He was pioneer Chief Business Development and Strategy Officer and in October 2001, was appointed Chief
26 8. NIGERIAN AVIATION HANDLING COMPANY PLC
Marketing Officer. Bolaji was appointed to the Presidential Advisory Committee on the Nigerian Capital Market in August, 2008. He joined the Chapel Hill Denham board in April 2005.
Arc. Usman A. Bello – Director Mr. Bello attended Ahmadu Bello University, Zaria from where he obtained a B.Sc. (Hons) Degree in Architecture (1985), as well as an M.Sc. in Architecture (1987) and an MBA (1993). He is a member of the Nigerian Institute of Architects, the Architect Registration Council of Nigeria, as well as an Associate Member of the Nigerian Institute of Management (NIM). He is a Property expert with considerable experience. He is also an Administrator of repute with enviable records. His directorial responsibilities cover Bells Pros & Services Ltd, HNB Security and Protective Company, Polyfibre Industrial Limited, and Confidence Finance Ltd.
Mr. Denis Hasdenteufel (French) – Director Mr Hasdenteufel represents Air France on the Board of Nahcoaviance. He attended Master of Commerce High School in Paris. He attended ESCP (Ecole Superieure de Commerce de Paris. He also graduated from the French Business School (1984). He has held various positions in Air France, ranging from General Manager at Charles de Gaule Airport to his present position as International Purchasing Vice President. Mr. Hasdenteufel represents Air France on the boards of CIAS (Singapore), AIDA (Mauritius) and AFSL (Great Britain). Mr. Hasdenteufel joined Nahcoaviance Board in 2000.
Mr. Wolfgang Wallmeroth (German) – Director Mr. Wolfgang Wallmeroth is Director of Operations and Airport Services West Africa for Lufthansa German Airlines. He graduated from Universitaet der Bundeswehr, Hamburg in 1982 with a Master's Degree in Economics and Organisational Studies with concentration in Ergonomics. Mr. Wallmeroth joined Lufthansa German Airlines in 1990 as a Management Trainee in the Operations Division and rose through the ranks, his most recent position prior to his current position was as the General Manager Operations and Airport Services, Boston, Detroit, Montreal and Toronto. He started his working career with the German Armed Forces in 1978 and had risen to the rank of Company Commander, Armored Infantry Bataillon 5/Panzergrenadierbataillon 132, Wetzlar when he disengaged from service in 1990. Mr. Wallmeroth joined the Nahcoaviance Board in 2009 as the Lufthansa German Airline's representative.
Dr. Faruk Umar- Director Dr. Umar is an alumnus of the Ahmadu Bello University, Zaria where he obtained both his Bachelor and Master Degrees in Education Psychology in 1976 and 1979 respectively. He also obtained his Doctorate Degree in the same discipline from University of Wisconsin, USA in 1987. He started his working carrier at the School of Preliminary Studies, Kano as a Lecturer in 1977. Between 1983 and 1984, he served as Permanent Secretary (Special Duties) in the Kano State Government. Between 1988 and 1991 he worked as Manager, Research and Educational Services, Kano State Foundation. Dr Faruk has served as a director on the Boards of Ashaka Cement Plc, Union Homes Savings and Loans Plc and 1004 Estates Limited and is currently on the Boards of Cement Company of Northern Nigeria, American Hospital Ltd and Board of Governors, Pearl Award.
He is a member of the Audit committees of ConOil Plc, OandO Plc, Aso Savings and Loans Plc, Oceanic Bank International Plc, Vitafoam Plc and Stacomms Nigeria Plc. Dr Faruk has also served as a member of the Finance and Economy Committee of the Presidential Policy Advisory Committee; Finance Committee, Vision 20:2020 and Review of Investment and Securities Act.
Dr. Umar is the current National President of Rumfa Old Boys Association and Association for the Advancement of the Rights of Nigerian Shareholders (AARNS) and the recipient of many awards including the PEARL Special Recognition Award for Capital Market Development
Mr. Ian Petrie – Director Mr. Petrie is the Regional Commercial Manager for Africa, British Airways and is responsible for the management of all commercial and legal aspects of the business in Kenya, Rwanda and Uganda. He has worked at the Company since 1979 in varying capacities in several countries including Uganda, Kenya and
27 8. NIGERIAN AVIATION HANDLING COMPANY PLC
Nigeria. Mr. Petrie is a graduate of Wits University Graduate School of Business in Johannesburg and Wits Technicon (2004).
Mr. Gordon Paul Gofwan – Director Mr. Gofwan is an alumnus of Ahmadu Bello University, he graduated with a B.Sc(Honors) Accounting in 1988. He also obtained an MBA from IESE Business School Barcelona (1988). Mr. Gofwan is an experienced banker with over 20 years of experience covering Risk Management, business development and wholesale banking. Prior to joining Nahcoaviance in April 2010, Mr. Gofwan was Director, Wholesale Banking at United Bank of Africa Plc (“UBA”) where he was responsible for UBA‟s wholesale banking strategy, origination and coverage in Northern Nigeria. He also worked as an Assistant General Manager at UBA, First Inland Bank (now Finbank) Mr. Gofwan has worked in various other capacities at the Bureau of Public Enterprises, FSB International Bank (now Fidelity) and Nigerian American Merchant Bank and Owena Bank. Mr. Gofwan has had extensive international trainings in the UK and USA including Project Finance, Corporate Risk Analysis and Small Scale Lending. 8.4 KEY MANAGEMENT STAFF
Mr. Nobert Bielderman – Chief Operating Officer Mr. Bielderman graduated from the University of the Netherlands Antilles with a Bachelors in Management in 1981. Since 1990, Mr. Bielderman has been involved in the air cargo and logistics business in various capacities and working with various companies. Between 1990 and 1997 he worked for various KLM Cargo subsidiaries, including CSC/Aerocargo Inc., KLM Cargo Central America & Caribbean, KLM Cargo and Cargo Service Center Holding BV, during this time he rose from Project Manager to Senior Cargo Project Manager. From there he moved to Swissport International Limited, working in Johannesburg, Capetown, Jeddah. In 2000, he was appointed Vice President, Ramp & Load Control for Swissport Basel AG and in 2002, President and Chief Executive Officer, Aerocharter/Swissport Servicios SA de CV. In 2005 he was Vice President, Operation for Transafrik International Limited. Most recently, between 2008 and 2009, he was a Senior Logistics Consultant to Thor Shipping Group of Companies assisting with the logistics set up of a new Cargo Warehouse.
Mrs. Folashade Ode - Company Secretary/ General Counsel Mrs. Ode holds a Bachelor of Law degree from Lagos State University (1990) and was admitted to the Nigerian Bar in 1991. She obtained a Master's Degree in Business Administration with specialisation in International Business from Lagos State University in 2005. She had more than 13 years experience in corporate law before joining Nahcoaviance in 2005. She had previously worked with Bullion Nominees Ltd, Bank Oki & Co. Legal Practioners and Lasaco Assurance Plc., where she attained the position of Head, Legal Department. Mrs Ode is a member of the Institute of Management.
Mr. Umar Birmah – Group Head, Human Resources and Organisational Development Mr. Birmah received a Higher National Diploma in Business Administration from Federal Polytechnic, Mubi in 1986 and a Masters in Business Administration from Ahmadu Bello University, Zaria in 1999. Mr. Birmah started his professional career at the Gongola State Ministry of Establishment, from where he moved to the state‟s Ministry of Finance, he then moved to the banking industry, where he spent 13 years of his professional career. In 2002 he started his human resources career at Dangote Nigeria Limited. His most recent employment prior to NAHCO was with Commonwealth Manufacturing Industries Limited, where he was General Manager, Admin & Human Resources.
Mr. Sanya Onayoade – Head Corporate Communications Mr. Onayoade received a Higher National Diploma in Mass Communications from Ogun State Polytechnic in 1990 and a Masters in Communication Arts from the University of Ibadan in 2002. Prior to his employment with NAHCO, Mr. Onayoade was most recently a Media Consultant with the British Council. He has also worked as a consultant in various capacities for the following organizations, Industrial Training Fund, Office of the Deputy Governor of Osun State and Institute of Directors of Nigeria. He also has experience working for the Punch and Guardian newspapers. He has attended several training courses in Nigeria, South Africa and the USA.
28 8. NIGERIAN AVIATION HANDLING COMPANY PLC
Ms. Ona Peters – Head, Enterprise Risk Management Ms. Peters received a Bachelor of Law degree from the Obafemi Awolowo University in 1987 and a Masters in Business Administration from Esut Business School, Lagos Campus in 1999. Prior to joining NAHCO, she was the Head, Subsidiary Risk Oversight and Special Projects for Diamond Bank Plc, before which she worked as a Fraud Investigator for the United States Consulate, Lagos. Ms. Peters also worked at Continental Trust Bank and Universal Trust Bank as Head, Credit Admin & Control.
29
9. USE OF PROCEEDS
The costs and expenses of the Issue, which are estimated at approximately N[.] billion or [.]% of gross proceeds, are payable by the Company. The proceeds of the Issue will be utilised as follows:
Use of Proceeds Amount % Duration Procurement of Equipment* 38 3-6 months Acquisition of Ground Handling Assets 30 18 months Refinancing/Repayment of existing bridge facilities 20 3 months Building of additional warehouse 6 3 months ICT and Working Capital needs 6 12months
NAHCO commenced on the Cargo Warehouse Modernization Project in Q4 2010, the first of its kind in West Africa. The Project entails the upgrade of the physical infrastructure and automation of the cargo handling logistics, in order to optimize the warehousing operational processes. Its main features include:
Internal Expansion of the warehouse space This entails the removal of internal partition walls between the existing warehouses to increase warehouse storage space of the Import warehouses.
Installation of mechanical handling and automation systems Motorized roller conveyors, frictionless castor mat platforms and workstations are to be installed for faster transfer of palletized cargoes in and out of the warehouses.
Installation of new euro-pallet and oversize racks New pallets for the storage of palletized standard and oversize cargoes are to being set up in the import warehouses to increase both the storage and throughput of cargoes to 200,000 tons and 60 tons of imports and exports annually.
Installation of empty air pallet and container racks (ULD’s) The storage of empty air pallets and containers would be done on newly installed pallet and container racks.
Installation of modern cold-room equipment Heavy duty cold rooms for the storage of cold and frozen imports and exports are to be installed in the import and export warehouses.
Construction of special storage rooms Special storage rooms for dangerous goods, valuables, radioactive, human remains and live animals will be constructed in the Import and Export warehouses.
Installation of CCTV and computerized access control system Closed circuit cameras are to be installed in the import and export warehouses to enhance security surveillance while turnstiles equipped with computerized access control systems would ensure restriction of unauthorized access into the sterile areas of the warehouses.
Installation of fire detection system Fire protection and safety would be enhanced with the provision of fire alarm systems and pressurized mechanical water sprinkler systems for timely fire detection and fighting respectively in the incidence of fire occurrence.
Construction of new staff rest room A staff rest room, consisting of a rest lounge, kitchenette, cloak room and conveniences, is to be constructed to improve staff welfare, health and safety.
*Please find the schedule of equipment to be procured in Appendix B. 30
9. USE OF PROCEEDS
9.1 EXPANSION OF THE WAREHOUSE SPACE
9.2 EXPANSION OF THE WAREHOUSE SPACE (2)
31
9. USE OF PROCEEDS
9.3 PROCUREMENT OF NEW EQUIPMENTS (HIGHLOADER)
9.4 PROCUREMENT OF EQUIPMENTS (TRACTORS)
32
9. USE OF PROCEEDS
9.5 PROCUREMENT OF EQUIPMENTS (MOBILE PASSENGER STEP)
PROJECT BENEFITS Some of the benefits of the Warehouse Modernization Project include:
a. Crowd Control and Safety The issue of crowd control and security of the warehouse will be addressed by the proposed installation of computerized access control system and intelligent closed circuit television (CCTV). This would reduce to the barest minimum the incidence of pilferages and missing cargoes, while eliminating associated consignee claims.
Safety compliance, a regulatory requirement, will be ensured through the installation of automatic fire detection system and mechanical pressurized water sprinklers in the warehouse to ensure effective fire protection.
b. Service Delivery Improvement The most important benefit of the project is that it will significantly enhance cargo service delivery as turnaround time will improve and the entire cargo handling and warehousing processes will become more efficient and customer-friendly.
c. Enhanced Warehouse Storage The new Cargo Warehouse when completed would have expanded capacities to handle annual cargo throughput of 200,000 tons of import and 60,000 tons of export cargoes respectively.
d. Staff Welfare The welfare of NAHCO staff will be enhanced by improving the internal working conditions of the warehouse. A suitable staff room comprising of a relaxation lounge, kitchenette, and cloak room will also be included in the project to boost safety, morale and productivity of staff.
Presently, the project is now at 55% completion and is expected to become fully operational by November 30th, 2011.
33 10. RISKS AND MITIGATING FACTORS
An investment in Bonds involves a high degree of risk. Accordingly, prospective investors should carefully consider the following risk factors together with all of the other information included in the Shelf Prospectus, the Supplementary Shelf Prospectus and any other Pricing Supplement/ Supplementary Shelf Prospectus before purchasing the Bonds. The risks below are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently consider immaterial may also materially and adversely affect the Company. Any of the following risks could result in a material adverse effect on the Company‟s financial condition, results of operations and ability to service debt, including the Bonds. These risks may also have a material adverse effect on the revenue, costs and other estimates and assumptions made for purposes of the financial model shown in this Prospectus, causing actual operating results to be materially lower than those reflected in the financial model. a. Political Risk Nigeria has experienced periods of political instability since its independence in 1960. After 16 years of military rule, a democratic government was reinstated in 1999. Since then, significant progress has been made to strengthen the political environment, economy and tackle corruption, but Nigeria‟s track record under democracy is short and challenges remain. The transition of power from President Obasanjo, who had served since 1999, to President Umar Musa Yar‟Adua marked the first time in Nigeria‟s history that power has been handed democratically from one elected government to another. The death of President Umaru Musa Yar‟adua in May 2010 and the subsequent peaceful transfer of power to his Vice President Mr Goodluck Jonathan further provide evidence of the maturity of Nigeria‟s polity.
Presidential elections were held on 16 April 2011 and although the elections were reportedly to have been conducted peacefully and credibly, prior to the final announcement of the results, post-election violence and riots occurred in certain cities of some of the northern states of Nigeria. The violence was reportedly as a result of the dissatisfaction with election results by supporters of an opposition party, who believed that the results declared in those states did not reflect the perceived widespread support for their candidate. The Independent National Electoral Commission declared the incumbent President Goodluck Ebele Jonathan as the winner, with over 58.89% of the total votes cast. President Goodluck Ebele Jonathan secured more than 25% of the votes cast in over two-thirds of the states in Nigeria and avoided the need for a run-off with the opposition candidate. President Goodluck Ebele Jonathan was sworn into office on May 29, 2011.
Mitigating Factor The seamless transition to a new government following the death of President Umar Musa Yar‟Adua and the widespread local and international acceptance of the 2011 General Elections as free and credible demonstrate that the Nigerian polity is maturing. Furthermore, political and judicial institutions continue to be strengthened in recognition that democratic governance positively impacts development. b. Economic Risk The Nigerian economy has been severely impacted by the global recession which created significant downturn in the capital markets as well as a liquidity squeeze, creating a challenging operating environment. A prolonged recession would put further constraint on business spending, investments and lending which in turn may result in reduced air traffic.
Mitigating Factor: Economies are gradually emerging from the recession and are beginning to witness improved performance. In Nigeria, the Central Bank of Nigeria (CBN) continues to introduce reforms aimed at stimulating the economy and creating a stable and healthy platform for growth. c. Currency Risk A number of the projects that will be undertaken by the Company may involve a foreign currency component either in terms of the cost of manpower and equipment or other foreign denominated elements required for the execution of such projects. Fluctuations in the value of the Naira can make the costs of projects more expensive than currently projected, thus impacting negatively on the Company‟s ability to complete the projects within the
34 10. RISKS AND MITIGATING FACTORS existing financing structure. Consequently, the Company may not generate the revenues anticipated from the projects. Mitigating Factor: The Central Bank of Nigeria continues to implement polices aimed at the proactive and effective management of the exchange rate. These policies have strengthened the Naira, and it is expected that the currency will remain stable in the foreseeable future. d. Specific Risk Revenues The Company‟s Revenues may not attain the projected growth rate and thus impact on the ability to redeem the Bonds, as and when due.
Mitigating Factor: The financial forecasts for the Company are based on modest assumptions. In addition, the Company has outlined strategies to maintain the consistent revenue growth which continues to be attained. e. Interest Rate Risk Changes in market conditions could impact interest rates, which may have an adverse effect on the value of the bonds; with the Bonds being unattractive to investors and the prevailing rates being more attractive than the coupon applicable to the Bonds in issue.
Mitigating Factor: The prevailing interest rate regime is likely to be maintained for the foreseeable future as the Central Bank of Nigeria continues to pursue and encourage single-digit interest rates. Furthermore, investors may also choose to hedge against interest rate risks through interest rate swaps. f. Environmental Risks Natural disasters may have an impact on the expected revenue streams or destroy some of the projects being constructed. This will have a negative impact on the projected cash flows expected to be generated by the Company. There may also be negative environmental impacts of respective projects proposed by Nahcoaviance.
Mitigating Factor: Environmental impact analyses for prospective projects will be undertaken, negative impacts identified, and the measures for managing such impact will be proposed and applied. g. Regulatory Environment The Statutory and Regulatory environment will change and the policies that have created an enabling environment for the issuance of the Bonds will be amended.
Mitigating Factor: The Federal Government and the respective regulators are committed to creating and sustaining an investment-friendly environment governed by stable policies.
35
11. FINANCIAL SUMMARY
11.1 REPORTING ACCOUNTANTS’ REPORT
The Managing Director Nigerian Aviation Handling Company Plc NAHCo House Murtala Mohammed International Airport Ikeja Lagos
14 April 2011
Dear Sir
We have reviewed the five-year financial information of Nigerian Aviation Handling Company Plc (“the Company”) as set out on pages 40 to 42.
The financial information is extracted from the audited financial statements of the Company for the five financial reporting years ended 31 December 2010, adjusted for matters arising from our review and has been prepared in accordance with the accounting policies set out on pages 39.
The financial statements were prepared in accordance with Statements of Accounting Standards applicable in Nigeria and in the manner required by the Companies and Allied Matters Act of Nigeria. The financial statements were reported on by Horwath Dafinone, and they conducted their audit in accordance with International Standards on Auditing and reported for each year without modification. No financial statements have been prepared in respect of any period subsequent to 31 December 2010 which has been subject to audit.
The five-year financial information is the responsibility of the Directors of the Company. Our responsibility is to issue a report on the financial information based on our review. The directors are also responsible for the contents of the prospectus in which this report is included.
Our review was conducted in accordance with the International Standards on Review Engagements (ISRE) 2400. This standard requires that we plan and perform our review to obtain moderate assurance as to whether the five- year financial information is free from material misstatements. Our review was limited primarily to inquiries of the Company‟s management and analytical procedures applied to the financial data and therefore provide less assurance than an audit. We have not performed an audit, and, accordingly, we do not express an audit opinion. We have not performed an audit on the five-year financial information or on the financial statements which form the basis of the five-year financial information, and accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying five-year financial information does not give a true and fair view of the state of affairs of the Company as at the balance sheet dates and of the operating results and cash flows for each of the years then ended in accordance with the Statements of Accounting Standards applicable in Nigeria.
Yours faithfully
Oladapo Okubadejo
36 11. FINANCIAL SUMMARY
11.2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
(a) Basis of accounting The financial statements have been prepared under the historical cost convention.
(b) Turnover Turnover represents the net value of services rendered to customers.
(c) Fixed assets Fixed assets are recorded at the cost incurred in both acquiring the asset and putting it into its condition prior to its use. Capital work-in-progress are stated at cost and transferred to relevant class of assets when put into use.
(d) Depreciation of fixed assets Depreciation is calculated to write off the cost of fixed assets on a straight line basis over the expected useful lives of the assets concerned. The annual rates used for this purposes are:
Class of assets % Leasehold land and building 5 Furniture, fittings and equipment 10 Computer equipment and software 20 Motor vehicles 25 Plant and machinery 10 100
Capital work in progress, representing assets in the course of construction, is not depreciated until the assets are brought into use.
(e) Debtors These are stated after making specific provisions for debts considered doubtful of recovery.
(f) Stock These are valued at lower of cost and net realizable value, after making adequate allowances for obsolete and slow moving items.
(g) Foreign currencies Transactions denominated in foreign currencies are translated into Naira at the rates of exchange ruling at the date of transaction or the rates at which the transactions are contracted to be settled. At the balance sheet date, balances denominated in foreign currencies other than those subject to contracted rates of settlement, are translated into Naira at the rates ruling at that date. Exchange gains and losses arising from such translation are dealt with in the profit and loss account.
(h) Taxation Provision for income tax is based on the profits of the company as adjusted for in accordance with the current tax legislation. Education tax is based on the provisions of the Education Tax Decree, 1993. Deferred taxation is accounted for using the liability method and calculated at the current tax rate on the differences between the net book value of the qualifying fixed assets and their corresponding tax written down value.
(i) Retirement benefits In line with the provisions of the Pension Reform Act 2004, the company operates a defined contribution pension scheme. Staff contributions to the pension scheme are funded through payroll deductions while the company‟s contribution is charged to the profit and loss account.
37 11. FINANCIAL SUMMARY
11.3 PROFIT & LOSS ACCOUNT
As at December 31st 2010 2009 2008 2007 2006 Profit & Loss N'000 N'000 N'000 N'000 N'000
Turnover 6,345,539 6,066,549 4,430,035 3,661,275 3,245,533 Operational Costs (3,269,750) (2,920,046) (2,396,835) (2,148,889) (1,985,845))
Gross Profit 3,075,789 3,146,503 2,033,200 1,512,386 1,259,708
Administrative Expenses (1,527,976) (1,305,179) (1,100,003) (870,679) (774,432),744 Trading Profit 1,547,813 1,841,324 933,197 641,707 485,256)
Other Income 165,245 133,644 186,116 145,509 62,259 Operating Profit 1,713,058 1,974,968 1,119,313 787,216 547,515 Exceptional Item - 85,251 - - Interest receivable and similar income 55,251 145,952 198,951 21,997 32,288 Interest payable and similar charges (57,152) (223,360) (186,526) (23,233) (23,877)
Profit before taxation 1,711,157 1,897,560 1,216,989 785,980 555,926 Taxation (533,653) (650,226) (414,079) (196,030) (121,829)
Profit for the year after taxation 1,177,504 1,247,334 802,910 589,950 434,117 Dividend (interim) (307,617) (246,094) - - (90,000) Profit for the year after taxation and dividend 869,887 1,001,240 802,910 589,950 344,097
38 11. FINANCIAL SUMMARY
11.4 BALANCE SHEET
As at December 31st 2010 2009 2008 2007 2006 Balance Sheet N'000 N'000 N'000 N'000 N'000 Tangible fixed assets 4,484,258 3,449,979 3,143,239 3,081,582 2,248,215
Current Assets Stocks 51,125 35,274 53,030 60,910 69,229 Debtors and prepayments 1,895,473 1,083,269 1,567,061 1,143,262 1,002,084 Cash and bank balances 879,959 2,194,715 1,225,052 643,499 621,057 2,803,903 3,313,258 2,845,143 1,847,671 1,692,370
Creditors: Amounts falling due within one year Creditors and accruals (1,031,333) (925,405) (1,057,094) (1,736,484) (1,455,854) Taxation (409,834) (460,014) (215,304) (132,000) (147,044)
Net Current Assets 1,362,736 1,927,839 1,572,745 (20,813) (89,472)
Total assets less current liabilities 5,846,994 5,377,818 4,715,984 3,060,769 2,337,687
Deferred employees emoluments - - (1,033,133) (875,001) Deferred Tax (854,000) (701,000) (499,000) (328,000) (263,000)
Net Assets 4,992,994 4,676,818 4,216,984 1,699,636 1,109,686
Capital and reserves Share Capital 615,244 615,234 492,187 375,000 150,000 Share Premium 1,914,758 1,914,758 1,914,758 320 320 Dividend reserve - 553,711 541,406 262,500 - Revenue reserve 2,463,002 1,593,115 1,268,633 1,061,816 959,366 4,992,994 4,676,818 4,216,984 1,699,636 1,109,686
39 11. FINANCIAL SUMMARY
11.5 CASH FLOW STATEMENT
As at December 31st 2010 2009 2008 2007 2006 Cash Flow Statements N'000 N'000 N'000 N'000 N'000 Operating activities Operating Profit 1,713,058 1,974,968 1,119,313 787,216 547,535 Adjustment for items not involving the movement of funds: Investment Provision - - - - Depreciation 562,118 513,760 461,401 318,300 244,606 Adjustment of fixed assets - - - - Loss/(gain) on disposal of fixed (303) 1,008 (623) (6,469) 3,252 assets Provision for doubtful debts (35,373) (207,985) (176,208) - - Exceptional Items - - - - 2,239,500 2,281,751 1,403,883 1,099,047 795,393
Other adjustments to reconcile operating profit to cash from operating activities Rebate on concession charges - 360,741 - - Payment of gratuities - (275,490) - - Decrease/(increase) in debtors and (743,512) 522,290 (343,407) (80,329) (21,535) prepayment Decrease in stock (15,851) 17,756 7,880 8,319 28,351 (Decrease)/increase in creditors 105,928 (131,689) (1,320,629) 238,159 85,187 Taxation paid including WHT (476,871) (242,014) (240,167) (206,923) (165,507) deducted
Cash inflow/(outflow) from 1,109,194 2,448,094 (407,189) 1,058,273 721,889 operating activities
Investing activities Purchase of fixed assets (1,627,154) (827,317) (523,598) (1,153,242) (573,077) Proceeds from sale of fixed assets 31,060 5,809 1,163 8,044 2,135 Interest received 55,251 145,952 198,951 21,997 32,288 Cash outflow from investing (1,540,843) (675,556) (323,484) (1,123,201) (538,654) activities
Financing Activities Decrease in bank overdraft - (391,894) 200,603 27,850 Interest payable and similar (21,779) (15,375) (10,318) (23,233) (23,877) charges Net proceeds from share issue - - 1,976,938 - - Dividend paid (861,328) (787,500) (262,500) (90,000) (90,000) Cash (outflow)/inflow from financing activities (883,107) (802,875) 1,312,226 87,370 (86,027)
Increase in Cash (1,314,756) 969,663 581,553 22,442 97,208
Cash and cash equivalents at the 2,194,715 1,225,052 643,499 621,057 523,849 beginning of the year Cash and cash equivalents at the 879,959 2,194,715 1,225,052 643,499 621,057 end of the year
40 11. FINANCIAL SUMMARY
11.6 NOTES TO THE FINANCIAL STATEMENTS
1. Turnover
December December December December December 2010 2009 2008 2007 2006 Turnover (Analysis by category) N’000 N’000 N’000 N’000 N’000 Passenger handling 2,792,592 2,434,672 2,123,116 2,320,219 2,203,000 Cargo handling 3,236,480 3,370,859 2,095,982 1,178,783 961,683 Equipment rental and maintenance 316,467 261,018 210,937 162,273 80,870 6,345,539 6,066,549 4,430,035 3,661,275 3,245,553
2. Other operating income Other operating income is made up of the following:
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Office rental 74,676 60,139 78,846 50,988 19,900 Rental from trans-shipment warehouse 62,044 38,302 57,634 52,519 38,609 Insurance claim 16,111 1,463 2,506 16,033 2,447 Profit on disposal of fixed assets 303 - 623 13,250 1,303 Income from advertisements 1,275 20,250 26,375 6,469 - Sundry income 10,836 13,490 20,132 6,250 -
165,245 133,644 186,116 145,509 62,259
3. Exceptional item
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Rebate on concession charges - - 360,741 - - Payment of gratuity relating to change in accounting estimates - - (275,490) - - - - 85,251 - -
4. Interest receivable and similar income
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Interest income 55,251 120,772 185,299 21,997 27,541 Exchange gain - 25,180 13,652 - 4,747 55,251 145,952 198,951 21,997 32,288
41 11. FINANCIAL SUMMARY
5. Interest payable and similar charges
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Bank charges and interests 18,401 14,367 10,318 10,660 18,515 Provision for doubtful debt 35,373 207,985 176,208 8,038 - Loss on disposal of fixed assets - 1,008 - - 3,252 Exchange difference 3,378 - - 4,535 2,110
57,152 223,360 186,526 23,233 23,877
6. Profit before taxation This is arrived at after charging:
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Depreciation 562,118 513,760 461,401 318,300 244,606 Directors emoluments 203,065 104,750 54,247 25,652 7,960 Board expenses 145,400 112,733 60,837 84,022 112,123 General meeting expenses 40,072 86,523 28,675 - - Auditor's remuneration 7,000 7,000 6,000 6,000 5,000 Staff participation scheme 117,931 130,778 59,012 63,728 - Rebate on concession charges - - (360,741) - - Gratuity payment - - 275,490 - -
Provision for doubtful debts 35,373 207,985 176,208 8,038 - Loss/(Profit) on disposal of fixed assets (303) 1,008 (623) (13,250) (1,949)
7. Taxation Taxation balance is analysed as follows:
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Profit and loss account (I)Tax on ordinary items: Income tax charge based on the total profit for the year 336,000 393,000 161,000 110,000 81,000 Education tax at 2% of assessable profit 46,000 48,000 32,000 22,000 17,000 (Over)/Under provision in prior years (1,347) 7,226 50,079 (970) (2,171) Deferred taxation (Note 13) 153,000 202,000 171,000 65,000 26,000 Total tax charge for the year 533,653 650,226 414,079 196,030 121,829
42 11. FINANCIAL SUMMARY
Balance sheet Prior year unpaid tax 460,014 215,304 132,000 147,044 49,044 Income tax for the year 336,000 393,000 161,000 110,000 81,000 Tax paid for the year (432,180) (196,290) (109,696) (147,044) 2,171 Education tax 46,000 48,000 32,000 22,000 17,000 Balance as at end of year 409,834 460,014 215,304 132,000 147,044
8. Fixed assets
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 COST Land and Building 1,600,581 1,561,200 1,367,085 1,212,710 1,091,683 Plant and Machinery 4,147,484 3,266,038 2,786,394 2,474,197 1,443,435 Motor Vehicle 345,698 221,235 176,893 127,953 116,865 Imuse, Hermes & Computer Equipment 849,736 784,055 640,753 601,684 437,969 Furniture Fittings and Equipment 201,618 185,517 162,755 152,423 143,908 Capital WIP 461,512 14,030 105,240 154,442 376,242 7,606,629 6,032,075 5,239,120 4,723,409 3,610,102
ACCUMULATED DEPRECIATION Land and Building 593,363 513,688 441,627 375,429 313,700 Plant and Machinery 1,642,373 1,329,438 1,040,365 795,030 648,002 Motor Vehicle 166,598 125,170 88,331 66,608 84,537 Imuse, Hermes & Computer Equipment 598,275 512,512 440,499 333,873 255,452 Furniture Fittings and Equipment 121,762 101,288 85,059 70,887 60,196 Capital WIP - - - - - 3,122,371 2,582,096 2,095,881 1,641,827 1,361,887
NET BOOK VALUE Land and Building 1,007,218 1,047,512 925,458 837,281 777,983 Plant and Machinery 2,505,111 1,936,600 1,746,029 1,679,167 795,433 Motor Vehicle 179,100 96,065 88,562 61,345 32,328 Imuse, Hermes & Computer Equipment 251,461 271,543 200,254 267,811 182,517 Furniture Fittings and Equipment 79,856 84,229 77,696 81,536 83,712 Capital WIP 461,512 14,030 105,240 154,442 376,242 4,484,258 3,449,979 3,143,239 3,081,582 2,248,215
43 11. FINANCIAL SUMMARY
9. Stocks
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Spare parts 39,157 25,892 41,895 48,307 51,305 Stationery 8,901 6,783 7,367 10,247 17,289 Medical 581 831 991 2,356 635 Diesel 2,486 1,768 2,777 - - 51,125 35,274 53,030 60,910 69,229
10. Debtors and prepayments
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Trade debtors 725,716 632,793 748,975 586,287 400,843 Prepayments and accrued income 49,214 58,836 46,464 162,281 28,153 Staff and other debtors 154,063 118,407 159,094 104,094 79,396 Deposit for fixed assets 641,908 17,353 395,146 153,610 417,551 Withholding tax recoverable 301,918 255,880 217,382 136,990 76,141 1,872,819 1,083,269 1,567,061 1,143,262 1,002,084
11. Creditors and accruals Creditors and accruals comprise the following:
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Bank Overdraft - - - 391,894 191,291 Trade creditors 15,157 40,910 67,826 47,798 134,396 Other creditors (including PAYE and social security (note 11a)) 280,849 324,311 305,735 287,585 446,339 Accruals and deferred income 735,327 560,184 683,533 1,009,207 683,828 1,031,333 925,405 1,057,094 1,736,484 1,455,854
11a. Other creditors
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Pension contributions 45,505 45,349 66,625 29,109 166,660 VAT 23,332 66,935 117,612 133,633 210,580 Withholding taxes 69,156 45,971 28,287 38,668 67,123 PAYE - 2,886 14,795 16,236 - Staff participation scheme 141,071 155,784 71,661 63,728 - Others 1,785 7,386 6,755 6,211 1,976 280,849 324,311 305,735 287,585 446,339
44 11. FINANCIAL SUMMARY
12. Deferred employees emoluments
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 At 1st January - - - 875,001 935,465 Charge for the year - - - 218,403 201,656 Payment in the year - - - (60,271) (262,120) - - - 1,033,133 875,001
13. Deferred taxation
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Balance at beginning of year 701,000 499,000 328,000 263,000 237,000 Charge for the year (note 7 (i)) 153,000 202,000 171,000 65,000 26,000 854,000 701,000 499,000 328,000 263,000
14. Share capital
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Authorised 750,000 750,000 500,000 500,000 150,000
Issued and fully paid: Balance brought forward 615,234 492,187 375,000 150,000 150,000 Rights issue - - 17,500 225,000 - Public offer - - 45,000 - - Bonus issue - 123,047 54,687 - - 615,234 615,234 492,187 375,000 150,000
15. Share premium
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Balance brought forward 1,914,758 1,914,758 320 320 320 Premium from rights issue of 35 million shares - - 560,000 - - Premium from public offer of 90 million shares - - 1,530,000 - - 1,914,758 1,914,758 2,090,320 320 320 Less: Share issue expenses for rights and public offers - - (175,562) - - 1,914,758 1,914,758 1,914,758 320 320
45 11. FINANCIAL SUMMARY
16. Dividend reserves
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Balance at beginning of year 553,711 541,406 262,500 90,000 90,000 Dividend proposed - 553,711 541,406 262,500 90,000 Dividend paid during the year (553,711) (541,406) (262,500) (90,000) (90,000) Balance as at end of year - 553,711 541,406 262,500 90,000
17. Revenue reserves
December December December December December 2010 2009 2008 2007 2006 N’000 N’000 N’000 N’000 N’000 Balance brought forward 1,593,115 1,268,633 1,061,816 959,366 615,249 Retained profit for the year 869,887 447,529 261,504 327,450 344,117 Bonus issue - (123,047) (54,687) (225,000) - Balance carried forward 2,463,002 1,593,115 1,268,633 1,061,816 959,366
46 11. FINANCIAL SUMMARY
11.7 5 YEAR FINANCIAL SUMMARY
Year ended 31st December 2010 2009 2008 2007 2006 N'000 N'000 N'000 N'000 N'000
Balance Sheet
Employment of Capital Fixed Assets 4,484,258 3,449,979 3,143,239 3,081,582 2,248,215 Investments - - - - - Net Current (Liabilities)/assets 1,362,736 1,927,839 1,572,745 (20,813) 89,472 Deferred Tax (854,000) (701,000) (499,000) (328,000) (263,000) Long term liabilities - - - (1,033,133) (875,001)
Net Assets 4,992,994 4,676,818 4,216,984 1,699,636 1,199,686
Capital Employed Share Capital 615,234 615,234 492,187 375,000 150,000 Share Premium 1,914,758 1,914,758 1,914,758 320 320 Dividend reserve - 553,711 541,406 262,500 90,000 Revenue reserve 2,463,002 1,563,115 1,268,633 1,061,815 959,366
Shareholders Funds 4,992,994 4,676,818 4,216,984 1,699,636 1,199,686
Profit & Loss Accounts
Turnover 6,345,539 6,066,549 4,430,036 3,661,275 3,245,553 Profit before taxation 1,711,157 1,897,560 1,216,989 785,980 555,946 Taxation (533,653) (650,226) (414,079) (196,030) (121,829)
Profit after taxation 1,177,504 1,247,334 802,910 589,950 434,117
47
12. NIGERIA OVERVIEW
INTRODUCTION Nigeria is a sovereign nation and consists of thirty-six states and the Federal Capital Territory. Nigeria operates a federal system of government comprised of three tiers; namely the federal government, state governments, and local governments. At both federal and state levels, there is a separation of power amongst the executive, legislative and judicial arms of government.
ECONOMY According to the International Monetary Fund, Nigeria is the second largest economy in Sub-Saharan Africa (after the Republic of South Africa) and the largest in West Africa. It is the eighth largest oil producing country and holds the eighth largest natural gas reserves in the world, with an estimated GDP in 20092 of US $161.6 billion and GDP per capita of US $2,270. Nigeria‟s exports are dominated by petroleum products which account for 95% of the county‟s foreign exchange earnings and approximately 80% of budgetary revenues3. However, escalating violence in the Niger Delta region adversely affected oil production in 2009, reducing the petroleum industry‟s contribution to GDP. Despite the decline in oil output, Nigeria has recorded steady growth in GDP in recent years due to the non-oil sector's strong performance. In recent years, the Nigerian economy has broadened into other areas such as telecommunications, manufacturing and finance. In 2007, the non-oil sector grew by 9.6% in 2007, 9.0% in 2008, and 8.6% in 2009, indicating Nigeria‟s move towards a more diversified economy.
According to the CBN, overall real GDP grew 6.7% in 2009, slightly higher than 6.4% in the previous year. The non-oil sector remained the main driver for GDP growth, especially as it accounted for 84% of total output. Provisional data from the National Bureau of Statistics (NBS) indicated that real GDP grew 7.2% in the first quarter of 2010, compared to 4.5% in the corresponding period in 2009. The improvement is attributed to increased output in the oil and gas sector. Oil GDP grew 3.2% in the quarter compared to an 8.1% decline in Q1- 2009. The oil and gas sector benefited from the calm in the Niger Delta as production increased 9.8% to 2.25mbpd on average. The non-oil sector grew 8.2% compared to 7.9% in Q1-2009 with agriculture growing 5.5%.
Furthermore, Nigeria has benefited from a reduced perception of country risk which has accelerated foreign direct investment (“FDI”). In 2008, Fitch Ratings and Standard & Poor‟s reaffirmed the “BB” country risk rating assigned to Nigeria a year earlier and maintained the “Stable Outlook”, signifying their confidence in Nigeria. Additionally, under-developed infrastructure within the country has created significant unsatisfied demand and investment opportunities to bridge the demand gap which have motivated the increasing inflow of FDI outside the traditionally captive energy sector. The Nigerian Investment Promotion Commission (“NIPC”) estimates FDI was in the region of US$35 billion over the last 8 years.
Table 1: Nigeria – Key Macroeconomic Indicators Economic Indicators 2010E 2011E 2012E 2013E GDP at market exchange rates (US$ billions) 144 166 189 188 Real GDP growth (%) 4.4 5.3 6.2 5.8 GDP per capita (US$ market exchange rates) 943 1,072 1,195 1,164 Average Consumer Price Index (CPI) (%) 8.5 8.2 7.7 7.4 Population (million) 152.2 155.2 158.1 161.1 Total external debt (US$ billions) 8.8 9.7 10.5 11.4 Total external debt (% of GDP) 6.1 5.9 5.6 6.1 Exchange rate US$/N (average) 145 140 135 145 Personal disposable income (US$ billions) 55.5 58 61.2 62.2 Private consumption per head (US$) 415 468 526 522 Source: Chapel Hill Denham Research, EIU, CBN
2 Economist Intelligence Unit estimates 3 Central Intelligence Agency The World Factbook 2008 48
12. NIGERIA OVERVIEW
Provisional figures from the National Bureau of Statistics show that the agricultural sector was the largest contributor to the nations GDP followed by the wholesale and retail trade sector each contributing 44.30% and 17.56% respectively. The third largest contributor to the GDP is the crude petroleum & natural gas sector. These three sectors contributed over 75% to GDP in Q3 2010.
Table 2: Q3 2010 GDP by sector contribution SECTOR % Contribution Agriculture 44.30 Solid Minerals 0.39 Crude Petroleum and Natural Gas 15.38 Manufacturing 3.49 Telecommunications 4.34 Finance and Insurance 3.08 Wholesale and Retail Trade 17.56 Building and Construction 1.57 Hotels and Restaurants 0.48 Real Estate 1.62 Business and Other Services 0.81 Others 6.99 Source: National Bureau of Statistics
Capital Markets The equities market was expected to recover in 2009, following the precipitous decline witnessed in 2008, when the All Share Index (ASI) lost 46.3%. The market lost a further 33.8% in the year and was one of the worst performing indices in Africa (only Ghana performed worse). Indeed, the NSE posted the biggest decline among 89 global indices tracked by Bloomberg.
Investment in the equities market as measured by turnover, declined to N 688 billion from N2.4 trillion in 2008, a drop of about 71.3% partly as a result of depressed prices but largely due to a decline in trading activity. Indeed, average daily volumes traded dropped from 775.65 million shares worth N 9.55 billion in 2008 to 414.73 million shares valued at N 2.8 billion in 2009. In contrast, there was an obvious shift to the fixed income market where N 18.5 trillion worth of FGN bonds were traded in the OTC market versus N 10.4 trillion the year before. Indeed, subscriptions to new FGN bond issues also increased to N 1.1 trillion in 2009 from N846.0 billion the year before. The corporate bond market however, remained inactive with only one issue from GT Bank in December 2009, raising N 13.5 billion. There was however increased activity in the municipal bond market with Lagos, Kwara, Imo and Niger states raising a total of N 91.5bn from the capital markets. This activity in the bond market continued into 2010. The yield curve for H1 2010 saw a tilt towards the longer end, in line with the country‟s debt management strategy. In addition, a few more state governments, namely, Edo, Benue, Ebonyi, Kaduna and Bayelsa States respectively, approached the bond market at more attractive prices due to the increased level of investors‟ interest in market due to their stability.
The start of 2010 saw the equities market recover on the ASI, advancing by 21.9% in the first half of the year. This performance built on the recovery of the ASI which had a gain of 30.7% for H2 2009. Factors such as the reforms in the banking sector as well as monetary and fiscal expansionary policies undertaken by the CBN, accounted for the renewed confidence seen by investors after the 2008 market collapse. Additionally, the CBN‟s resolution of the banking crisis through the establishment of the Asset Management Corporation of Nigeria (AMCON), strong institutional investors‟ demand and incremental liquidity in the market spurred an overall growth in market, giving rise to a 19% year-on-year gain for 2010. At the close of 2010, the best performing sector on the market remained the NSE Food & Beverage index for the second time, recording a year-on-year gain of 48%. This came on the back of the slow decline in risk aversion by investors towards banking stocks, as many are cautiously observing the efficacy of the CBN reforms.
49
12. NIGERIA OVERVIEW
The start of 2011 has seen overall investor confidence shifting towards the debt market, as evidenced by the excitement surrounding the Federal Government‟s debut of its Eurobond. The issuance of the US$500 million Eurobond came through the Debt Management Office (DMO), on the 21 January, 2011. The bond was admitted on the London Stock Exchange on the 31 January, 2011 quickly becoming 250% oversubscribed by investors from about 18 countries, across Europe, America, Asia and Africa. Investors found this offering due 2021, particularly attractive with a 7% yield in comparison to the Eurobond offerings of Ghana and Gabon which have a 6.2% and 5.2% yield, both maturing in 2017. The equities market at the moment is trading relatively flat, with a 5.8% year- to-date gain.
External Debt Nigeria became the first African nation to fully repay its Paris Club debt in 2006, after years of economic mismanagement and profligate spending led to gross external debt escalating to over US$32 billion by the late 1990s. The deal saw Nigeria pay the Paris Club US$12.5 billion in exchange for the elimination of US$30.9 billion, the remainder of its official debt. The country has also committed to restructuring its debt of US$2.5 billion owed to the London Club of Creditors. Nigeria‟s Brady debt has effectively been paid down, after future payment obligation on Promissory Notes was transferred to Merrill Lynch in March 2007. As at the end of March 2011, Nigeria‟s external debt was estimated at US$5.2 billion, below 10.0% of GDP.4
Foreign Reserves At the beginning of 2009, Nigeria‟s external reserves stood at US$52.8 billion and the excess crude account at US$15.0 billion, creating a significant buffer against adverse economic and foreign exchange movements. By the end of the year, foreign reserves had declined by 26.7% to US$42.5 billion while the excess crude oil account balance declined by 56.7% to US$6.5 billion due to reduced foreign exchange earnings from oil and the subsequent dependence on the excess crude account to fund budget deficits. Foreign reserves picked up in the fourth quarter of 2009 due to increased oil production coupled with higher oil prices, with over US$3.0 billion added in October 2009 alone. However, as at March 2010, foreign reserves further retreated to US$41 billion after hovering between US$42 billion and US$43 billion in the first quarter of 2010.5 Foreign reserves retreated even further in the second quarter opening the period at US$41.5 billion and closing at US$38.2 billion; As at December 31, 2010, the foreign reserves were at US$32.3 billion. At the present levels, external reserves could finance as much as 40 months of imports.
Domestic Debt Domestic debt in Nigeria is mainly short term, as instruments with maturity structures of two years and below accounted for 41.0% of the total Federal Government domestic debt in 2008. The former Obasanjo administration took steps to address the post 1980s legacy of exposure to local contractors and to unfunded pension liabilities of the Federal Government and several of its agencies. Reforms in this regard include the introduction of the Debt Management Office, and the Pensions Reform Act 2004, which seeks to ensure that all employers of labour with at least five staff members have a fully funded pension scheme. The management of domestic public debt has also been improved by lengthening maturities to reduce rollover risks. Given the vast restructuring of Nigeria‟s external debt, the country‟s consolidated debt to GDP ratio dropped significantly from 53% in 2004 to an estimated 18.6% as at November 2010.
Foreign Exchange Exchange rates remained largely stable prior to the recession with the Naira strengthening against the United States Dollar to a high of N115.80 in May, 2008. However, as a result of speculative currency trading triggered by the reduction of external reserves following the global economic meltdown, coupled with the reduction in oil prices and global demand, there was significant demand for foreign currency (“FOREX”) which led to a subsequent devaluation of the Naira. In a bid to liberalise the FOREX market, The Central Bank of Nigeria discontinued the Retail Dutch Auction System (RDAS) and re-introduced the Whole Dutch Auction (WDAS), which restored some stability in the FOREX market. The steady rise in oil prices from Q2-09 has also contributed to the improvement in the FOREX market, with the current exchange rate at USD/NGN152.85 as at May 31, 2011.
4 Debt Management Office 5 Central Bank of Nigeria 50
12. NIGERIA OVERVIEW
Inflation Over the last 5 years, inflation rate has dropped steadily from a high of 23.7% (YoY) in 2003 to a record low of 5.4% as at December 2007. Although up from its record low, recent reforms have strengthened monetary management and helped contain inflationary pressure. Inflation remained in double-digit in the first four months of 2010. CPI rose from 12% year-on-year in December 2009 to 12.5% in April 2010. The primary driver of inflation in Nigeria remains food prices given that it accounts for 64% of the CPI basket. In March 2010, the inflation rate fell to 11.8% from 12.3% the month before. In November 2010 inflation fell to 12.8% from 13.4% in October. By June 2011, inflation had reduced further to 12.5%.
Interest Rates In a bid to restore liquidity and boost lending in the economy, the CBN recently reduced the Monetary Policy Rate (MPR), the benchmark for all other interest rates, to 6.5% down from 8.0% in July 2009. The CBN has kept rates unchanged in order to avoid sabotaging or slowing down the pace of economic recovery. The rate on a standing lending facility is currently at 200 basis points above the MPR, while the rate on a standing deposit facility is at 500 basis points below the MPR. Aggregate domestic credit grew 12.4% as at the end of May 2010 over the December 2009 level (29.7% when annualized) which is far below the 2010 indicative target of 55.54%. A breakdown of the total credit growth shows that credit to government grew 50.9% (or 122.1% on annualized basis), and this was the major contributor to growth in aggregate credit in the period, as credit to the private sector declined 1.9% (or 4.5% on annualized basis).
ECONOMIC REFORM INITIATIVES
The Jonathan Administration is firmly committed to creating a liberal market-oriented economy driven mainly by the private sector, while focusing on the need to alleviate poverty and advance local production. Nigeria‟s reform initiatives have been primarily centred on the following:
. Economic Stability Fiscal stimulus through draw downs from the excess crude account to augment monthly revenue to the 3 tiers of government. In addition to the measures taken by the SEC and the NSE to tighten regulation and reduce transaction costs, the CBN has introduced a number of measures towards stabilising the Banking sector.
. Oil and Gas / Extractive Minerals Sector Reform Deregulation of the downstream sub-sector; increased local content in the upstream sub-sector through the signing of the Local Content Bill; de-regulation and development of the solid minerals sector.
. Institutional Reform Civil service reforms (monetisation of public sector benefits) and right sizing public services; privatisation of key state-owned institutions; and deregulation of strategic economic sectors.
. Employment Generation and Poverty Alleviation The National Economic Empowerment and Development Strategy (NEEDS) is an initiative that encourages the people to take an active role in the prosperity of Nigeria. The National Poverty Alleviation Programme (NAPEP) is a programme with an objective to provide micro-credit and other productive assets to rural and urban poor communities.
51
12. NIGERIA OVERVIEW
. Accelerated Infrastructural Development The government has committed to an ambitious investment programme to address needs in critical areas such as power, transportation, and telecommunications through private/public partnerships (PPP) initiatives.
. Financial Sector Reform The Pension Reform Act; the Banking and Insurance sector reforms; and capital market reforms.
. Tax Reforms Establishment of an effective and disciplined tax management regime to support the government‟s drive for improved internal revenue creation.
. National Treasury Reform Restructuring of the Government‟s balance sheet for effective debt and reserve management, the introduction of a structured Government Bond programme for financing domestic debt, and the increased role of the Debt Management Office (DMO) to centrally coordinate the management of Nigeria‟s debt.
. Fiscal Reform/Public Expenditure Management The introduction of the Excess Crude Oil Account in which oil revenues earned above the reference oil price are accumulated.
RECENT DEVELOPMENTS
BANKING SECTOR REFORMS
Banking Reforms: 2004 - 2009
In 2004, Governor Chukwuma Soludo, the CBN Governor (2004 – 2009), increased the minimum capital requirement for the 89 existing banks in Nigeria from N2 billion to N25 billion. At the end of this process, 75 of the banks achieved the minimum capital requirements through mergers, acquisitions, takeovers, equity capital raising and capital injections from parent companies. The 14 banks which did not meet N25 billion were liquidated, therefore resulting to a leaner and highly capitalised banking sector. This consolidation exercise further led to an unprecedented growth in the years between 2005 and 2008 and on average, banks reported quarter-on-quarter gross earnings growth of 75.3% in the same period.
However, March 2008 marked a turning point for the economy, when the first signs of the effect of the global economic downturn on Nigeria were visible. Oil and Equity prices began falling at a steady decline and the effect on the Nigerian banking sector was especially significant due to its considerable exposure to the capital market as well as the oil & gas industry. Exposure to the capital market in the form of margin loans to operators and individuals stood at approximately N900 billion as at December 2008, representing 39% of shareholders funds. Equally, the industry‟s total exposure to the oil & gas industry was in excess of N754 billion, representing 27% of shareholders funds. .
Consequently, the CBN, embarked on a number of initiatives to reduce risk concerns and improve liquidity in the sector including the reduction of the Monetary Policy Rate (MPR), cash reserve requirement, and the liquidity ratio requirement, to name a few.
Banking Reforms: 2009 - Present
The current Governor of the CBN, Sanusi Lamido Sanusi, was appointed in June 2009. The CBN‟s first action under the leadership of Sanusi was to close the Extended Discount Window (“EDW”) in July 2009 and in its place, guarantee all inter-bank placements. The CBN/NDIC further carried out a special examination of the 24 deposit money banks around liquidity, capital adequacy and corporate governance. The results of the
52
12. NIGERIA OVERVIEW examination found 9 banks to be in a „grave situation‟ as defined in BOFIA – under-capitalised, insufficient liquidity and poor corporate governance.
In order to prevent further deterioration in the 9 banks, the CBN replaced the executive management in each bank and injected a total of N620 billion (US$4.2 billion) of Tier II capital into the 9 banks. The CBN‟s rationale for intervening was to resolve the immediate liquidity challenges in the country‟s banking system and to restore stability and confidence to the banking sector. In an effort to further stimulate liquidity across the sector, the CBN reduced statutory limits and guaranteed inter-bank placements. To manage the effects of its intervention, the CBN facilitated the recovery of NPLs of the Intervened Banks. Between August 2009 and xxx 2010, the 9 intervened banks are reported to have recovered N198 billion of NPL‟s (“Non Performing Loans”).
The CBN in conjunction with the Federal Ministry of Finance further lobbied for the formation of the Asset Management Corporation of Nigeria (AMCON) as a resolution vehicle that would function by assisting Deposit Money Banks in improving their capital and liquidity positions. The AMCON Act was passed by the National Assembly and signed into law by the President on July 19, 2010. AMCON was established to acquire NPLs from banks in exchange for liquid assets (i.e. Federal Government guaranteed bonds).
In its drive to restore stability in the Nigerian banking sector, the Corporation, on December 31, 2010 AMCON issued initial Consideration Bonds with a face value of c.N1.15tn to twenty-one (21) Eligible Financial Institutions (“EFI‟s”) in consideration for margin loans of all EFI‟s and NPL‟s of the intervened EFIs.
Furthermore, the CBN, after concluding its review of the Universal Banking code, in line with its efforts to reform the Nigerian financial system and ensure a more stable sector, issued new rules and guidelines for the banking licenses regime. The new rules require banks to either divest from all non-banking business or transition into a non-operating HoldCo structure.
Going forward, the regulatory stance will force greater transparency and disclosures. Regulators are expected to be more proactive and risk focused, which will enhance the governance and control environment in the banking sector. More than likely, we could see the introduction of risk adjusted capital requirements and the separation of balance sheets with forced autonomy for banks‟ commercial and merchant banking businesses.
The current banking reforms have forced Nigerian banks to effectively reveal the true state of their balance sheets and to implement strict governance and control processes. This has helped to contain widespread fears regarding the health of the banking sector and set the stage for the final phase of the CBN‟s reform agenda – a re- consolidation of the banking sector.
Advisers have been appointed by the CBN to assist the Intervened Banks in implementing a resolution plan which is expected to further stabilise the banking sector. Although the magnitude of losses incurred by the banks thus far has cast a bleak outlook on earnings in 2010, the actions taken by the banks and regulators will help to ensure that the lessons learned in the last 18 months are integrated into banks‟ operations going forward, thus creating a safer and well-regulated banking sector.
OUTLOOK
Despite the significant reduction in international investment in the country, Nigeria is still considered to present one of the most significant emerging market opportunities in the world due to the following:
. Strong underlying demographics: With an estimated population of over 149 million people growing at 2% annually, Nigeria is the most populous country in Africa.
. Stable political environment: Nigeria has had relative political stability since 1999, ending the country‟s preceding 16 year run under military rule. The successful handover of office to President Yar‟Adua, following the general election in 2007 and the recent handover to President Jonathan following the death of Yar‟Adua further signify the government and nation‟s commitment to maintaining democracy. The country will undergo general elections in 2011.
53
12. NIGERIA OVERVIEW
. Commitment to reform: The pace of reform in Nigeria in the last decade is a testament to the government‟s commitment to developing the country and specifically the private sector. This provides a favorable framework for investment, with several growth opportunities in sectors across the real economy.
. Improved purchasing power: Nigeria‟s purchasing power has been widely understated due to the significant size of the informal sector. GDP per capita (PPP) in 2009 was US$2,1996. The global recession resulted in a downturn in the capital markets and a corresponding decrease in portfolio values, affecting purchasing power. Although the capital market posted some recovery in 2010, it is not expected to rise to previous levels in the near future. As at the end of May 2011, the year-on-year growth in market capital is 29.86%.
. Wealth of natural resources: Nigeria is Africa‟s largest oil producing country, the eighth largest producer of crude oil in the world. As at January 2008, Nigeria had 36.2 billion barrels of proven oil reserves7, 2.92% of the world‟s reserves. With its large reserves of human and natural resources, Nigeria has the potential to build a highly prosperous economy, reduce poverty significantly and provide the infrastructure, health and education its population badly needs.
. External debt management: Nigeria has restructured and reduced its external debt from over US$32 billion to US$4.5 billion as at September 20108. On the back of previously high crude oil prices and more disciplined fiscal management, foreign exchange reserves stood at approximately US$32.3 billion9 as at December 2010. This is however a decrease from US$57 billion in November 2008 as the country‟s position came under significant pressure with the mass outflow of foreign investments from the country and the supply of foreign currency from the reserves. As at May 2011, Nigeria‟s external debt stood at US$5.2 billion.
. Significant investment opportunities in infrastructure: It is estimated that Nigeria requires an investment of US$100 billion (N15 trillion) in infrastructure – power, rail transportation, roads and oil & gas – to ensure continued economic growth and make Nigeria one of the 20 largest economies in the world by 2020.
. Nigeria Fiscal Budget: The FGN approved a budget of N4.1 trillion (US$27.8 billion) for the 2010 fiscal year. The budget was benchmarked against a price per barrel of oil of US$57 and a forecast oil production of 2.09 million barrels per day. Only 52% of the budget was implemented. In December 2010, the President presented the 2011 Budget of N4.2 trillion (US$28.05 billion) to the National Assembly for approval benchmarked against a price per barrel of oil of US$65 and a forecast oil production of 2.3 million barrels per day. Oil prices are on the rise with the price per barrel being US$116.24 as at May 31, 2011.
In conclusion, businesses face some challenges due to critical risk factors in the Nigerian economy such as the Niger Delta crisis, fluctuations in crude oil prices and huge investment requirements in infrastructure. The downturn in the capital markets and the liquidity squeeze in the banking sector in 2009 created a rather challenging operating environment. However, given Government intervention to date, in addition to proposed initiatives as well as the country‟s strong underlying fundamentals, Nigeria still presents an enabling and attractive environment for both new and existing non-cyclical businesses.
6 Central Intelligence Agency, The World Factbook 2008 7 BP Energy Statistical Review, June 2008 8 Debt Management Office 9 Central Bank of Nigeria 54
13. STATUTORY AND GENERAL INFORMATION
13.1 INCORPORATION & SHARE CAPITAL HISTORY
The authorized and issued shares of the Company as of February 14, 2011:
Authorized Authorized Issued Share Issued Share Consideration Share Capital Share Capital Capital Capital Increased from Increased to increased from increased to N N N N 25 May 2007 150,000,000 500,000,000 150,000,000 375,000,000 Bonus (3:2) 25 May 2007 - 500,000,000 375,000,000 392,500,000 Rights 25 May 2007 - 500,000,000 392,500,000 437,500,000 Public Offer 09 May 2008 - 500,000,000 437,500,000 492,187,500 Bonus (1:8) 21 August 2009 500,000,000 750,000,000 - 492,187,500 - 21 August 2009 - 750,000,000 492,187,500 615,234,375 Bonus (1:4)
13.2 SHAREHOLDING STRUCTURE
The following shareholders held more than 5% of the issued share capital:
Shareholder's Name May 31, 2011 British Airways 10.7% Rosehill Group Ltd 9.8% Lufthansa Commercial Holding GmBH 6.0% Air France 5.8%
13.3 DIRECTORS’ INTERESTS
The direct and indirect interests of the Directors in the issued share capital of the Company as recorded in the register of Directors shareholdings and/or notified by them for the purposes of Sections 275 and 276 of the Companies and Allied Matters Act, CAP C 20 LFN 2004 are as follows:
Director’s Name No. Of Shares % of shareholding General Ike Nwachukwu 62,500 0.005 Suleiman Ismail Yahyah – Direct 1,959,047 0.160 Indirect 120,872,187 9.82 Dr. Faruk Umar 775,566 0.063 Arc. Usman A. Bello 2,179,687 0.18 Mr. Dennis Hasdenteufel Nil Nil Mr. Lam Petrie Nil Nil Mr. Mobolaji Balogun – Indirect 309,375 0.025 Mr. Wolfgang Wallmeroth Nil Nil Mr. Kayode Ojo 25,625 0.002 Mrs. Folashade Ode 266,315 0.022
55 13. STATUTORY AND GENERAL INFORMATION
13.4 STATEMENT OF INDEBTEDNESS
As of December 31, 2010, Nahcoaviance had no loan capital, debentures, mortgages, overdrafts, short term loans, charges or similar indebtedness or material contingent liabilities other than those arising in the ordinary course of business.
13.5 CLAIMS AND LITIGATION
Nahcoaviance was involved in 14 cases in the ordinary course of business, comprising 3 cases instituted by the Company and 11 cases instituted against the Company which are pending in various courts in Nigeria. The total monetary claims in the cases instituted against the Company is estimated at N580,765,435.80. The Solicitors to the Company are of the opinion that the maximum potential liability to the Company from these cases should not exceed N92,973,482.58.
Save as herein disclosed, the Directors are not aware of any other pending or threatened claims or litigation involving the Company which may be material to the Offer.
The details of the matters herein referred to are contained in the document „Schedule of Claims & Litigation‟ annexed hereto.
13.6 MATERIAL CONTRACTS
The Agreements that are specifically material to this transaction are:
. The Programme Trust Deed dated [.], 2011 between Nigerian Aviation Handling Company Plc and First trustees Nigeria Limited by which the latter have agreed to act as Trustees to the Company‟s Debt Issuance Programme in connection with the N 5 Billion Bond Issuance;
. Vending Agreements and Series Trust Deeds that are to be issued for each tranche.
Other than as stated above, the Company has not entered into any material contract except in the ordinary course of business.
13.7 DECLARATION
. Except as otherwise disclosed herein:
. No share of the Company is under option or agreed conditionally or unconditionally to be put under option;
. No commissions, discounts, brokerages or other special terms have been granted to any person in connection with the issue or sale of any share of the Company;
. Save as disclosed herein, the Directors of Nahcoaviance have not been informed of any shareholding representing 5% or more of the issued share capital of the Company;
. There are no founders, management or deferred shares or any options outstanding;
. There are no material service agreements between Nahcoaviance and any of its Directors and employees other than in the ordinary course of business;
. There are no long-term service agreements between the Company and any of its Directors and employees;
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. No director or key management personnel has been involved in any of the following (in or outside Nigeria):
i) A petition under any bankruptcy or insolvency laws filed (and not struck out) against such person or any partnership in which he was a partner or any company of which he was a director or key personnel;
ii) A conviction in a criminal proceeding or is named subject of pending criminal proceedings relating to fraud or dishonesty;
iii) The subject of any order, judgement or ruling of any court of competent jurisdiction or regulatory body relating to fraud or dishonesty, restraining him from acting as an investment adviser, dealer in securities, director or employee of a financial institution and engaging in any type of business practice or activity.
13.8 COSTS AND EXPENSES
The costs and expenses of undertaking this Bond Issuance including fees payable to the SEC, the NSE and professional parties, filing fees, stamp duties and legal fees and other expenses, brokerage commission and the costs of printing and advertising the Offer are as set out in each Pricing Supplement/ Supplementary Shelf Prospectus issued by the Company.
13.9 CONSENTS
The following have given and not withdrawn their written consents to the issue of this Prospectus with their names and reports (where applicable) included in the form and context in which they appear:
The Directors of Nahcoaviance The Company Secretary of Nahcoaviance Chapel Hill Advisory Partners Limited Lead Issuing House Stanbic IBTC Bank Plc Joint Issuing House FCMB Capital Markets Limited Joint Issuing House Greenwich Trust Limited Joint Issuing House GTI Capital Limited Joint Issuing House Iroko Capital Limited Joint Issuing House Banwo & Ighodalo Solicitors to the Trustee Ahmed Uwais & Co. Solicitors to the Offer David Mando & Co Solicitors to the Company Horwath Dafinone Auditors KPMG Reporting Accountants Marina Securities Ltd. Stockbroker to the Offer Stanwal Securities Ltd. Joint Stockbroker to the Offer Compass Securities Ltd. Joint Stockbroker to the Offer TIDDO Securities Limited Joint Stockbroker to the Offer Yuderb Investments & Securities Limited Joint Stockbroker to the Offer CSL Registrars Limited Registrars First Trustees Nigeria Ltd Trustees
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13.10 DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents may be inspected at the offices of Chapel Hill Advisory Partners Limited, 1st Floor, 45 Saka Tinubu Street, Victoria Island, Lagos during normal business hours on any weekday (except public holidays) from the date of issuance of this Shelf Prospectus:
(a) Certificate of Incorporation of the Company; (b) The Memorandum and Articles of Association of the Company; (c) The Certified True Copy of the Board Resolution dated July 23, 2010 approving the Bond issuance Programme; (d) The Certified True Copy of the Shareholders Resolution dated August 21, 2009 approving the Bond Issuance Programme; (e) The Audited Financial Statements of the Company for each of the five years ended December 31, 2010; (f) The Reporting Accountants Report on Audited Accounts of the Company for five years ended December 31, 2010; (g) The material contract referred to in Section 13.6 on page 51; (h) The written consents referred to above; (i) The Shelf Prospectus issued in respect of the Bond Issuance Programme; (j) SEC Approval letter; and (k) NSE Certificate of Exemption. (l) Any Pricing Supplement or Supplementary Shelf Prospectus (m) Any Vending Agreements (n) Any Series Trust Deeds
13.11 RELATIONSHIP BETWEEN THE COMPANY AND ITS ADVISERS
As at the date of this Prospectus and in compliance with SEC Rule 184(1) as amended, we hereby state that there is no shareholding relationship between Nahcoaviance Plc and the Joint Issuing Houses/Book Runners. However, the Managing Partner of the Lead Issuing House is also a director of the Issuer. There is no other relationship between Nahcoaviance Plc, its respective directors, major shareholders and principal officers and the Parties to the Offer, except in the ordinary course of business.
13.12 EXTRACTS FROM THE PROGRAMME TRUST DEED
3. APPOINTMENT OF TRUSTEE AND CREATION OF TRUST
3.1 The Issuer hereby creates and establishes a trust for the benefit of the Bondholders. 3.2 The Trustee is hereby appointed as the representative of the Bondholders in accordance with the provisions of this Deed and will hold the benefit of the covenants and obligations of the Issuer herein contained for the benefit of the Bondholders and itself in accordance with this Deed. 3.3 The Trustee hereby accepts and agrees to enforce the powers and perform the duties and obligations of the Trustee as specifically set forth herein. 3.4 The Trustee shall have no duty, responsibility or obligation for the issuance of the Bond or Debt Securities or for the validity or exactness thereof, or of any document relating to such issuance. 3.5 The Trustee shall have no duty, responsibility or obligation for the repayment of the Bond or Debt Securities except in accordance with the terms and provisions hereof or any Supplemental Trust Deed. 17. NOTICE OF PAYMENTS
The Trustee shall give notice to the relevant Bondholders in accordance with the relevant Supplementary Trust Deed of the day fixed for payment of any Principal Amount to them.
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18. COVENANTS OF THE ISSUER
18.1 So long as the Bond remains outstanding, the Issuer covenants and agrees that:
(i) it will perform at all times any and all covenants, undertakings, stipulations and provisions on its part to be performed as provided herein and in the relevant Supplemental Trust Deed for every issue of Bonds executed and delivered hereunder and in all proceedings of the Issuer pertaining thereto.
(ii) it shall pay the Trustee such fees as may be agreed between the Parties, and reimburse the Trustee, for all agreed reasonable and proper out of pocket costs and expenses as they may incur in connection with the performance of its duties under this Deed including the agreed costs for convening and holding meetings of Bondholders.
18.2 So long as any of the Bonds remains outstanding, the Issuer shall:
(i) Ensure that it lodges the amount indicated in the Bond Re-payment Schedule (as annexed to the relevant Series Trust Deed) in the NAHCO DSRA for purposes of providing sufficient funding for the remittance of the interest to Bondholders in accordance with the repayment schedule provided in each Pricing Supplement; provided, in any event, that all deposits shall be made at least three (3) Business days following the end of each month.
(ii) at all times carry on and conduct its affairs and procure its Subsidiaries to carry on and conduct their respective affairs in a proper and efficient manner;
(iii) give or procure to be given to the Trustee such opinions, certificates and information as they shall require and in such form as they shall require same for the purpose of the discharge or exercise of the duties, trusts, powers, authorities and discretions vested in it under this Deed or by operation of law;
(iv) send to the Trustee (in addition to any copies to which it may be entitled as a holder of any securities of the Issuer) two copies of every report, circular and notice of general meeting(s) and every other document(s) issued or sent to its shareholders within seven (7) Business Days after the issue or publication thereof; (v) promptly give to the Trustee a copy if its audited accounts in respect of each financial year, commencing with the financial year ending December 2010 and in any event not later than one hundred and eighty (180) days after the end of each such financial period; (vi) within five (5) Business Days after a demand by the Trustee, provide a certificate in or substantially in the form set out in Schedule 4 signed by two of its Directors to the effect that as at a date not more than five (5) Business Days before delivering such certificate (the relevant certification date) there did not exist and had not existed since the relevant certification date of the previous certificate (or, in the case of the first such certificate, the date hereof) any Event of Default (or if such exists or existed specifying the same) and that during the period from and including the relevant certification date of the last such certificate (or, in the case of the first such certificate, the date hereof) to and including the relevant certification date of such certificate that it has complied with all its obligations contained in this Deed;
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(vii) at all times execute all such further documents, and perform all acts and things as may be necessary at any time or times in the opinion of the Trustee for the purpose of discharging their functions under, or giving effect to, this Deed; (viii) at all times retain the services of a Registrar in accordance with the Conditions; (ix) notify the Trustee forthwith in the event that it does not, on or before the due date for any payment in respect of the Bonds, pay the full amount of the monies payable on such due date; (x) use its best endeavours to maintain the quotation or listing on the relevant stock exchange of those Bonds which are quoted or listed on the relevant stock exchange or, if it is unable to do so having used such endeavours, use its best endeavours to obtain and maintain a quotation or listing of such Bonds on such other stock exchange or exchanges or securities market or markets as the Issuer may decide and also upon obtaining a quotation or listing of such Bonds issued by it on such other stock exchange or exchanges or securities market or markets enter into a trust deed supplemental to this Deed to effect such consequential amendments to this Deed as the Trustee may require or as shall be requisite to comply with the requirements of any such stock exchange or securities market;
(xi) give notice to the Bondholders, the Trustee and the SEC of the appointment, resignation or removal of the Registrar (other than the appointment of the initial Registrar) at least thirty (30) days prior to such event taking effect; provided always that so long as any of the Bonds remains outstanding in the case of the termination of the appointment of the Registrar no such termination shall take effect until a new Registrar has been appointed on terms previously approved in writing by the Trustee and the Trustee hereby covenant to forthwith provide a response on the approval upon request by the Issuer; (xii) send to the Trustee, not less than ten (10) days prior to the date on which any such notice is to be given, the form of every notice to be given to the Bondholders and obtain the prior written approval of the Trustee to, and promptly give to the Trustee two copies of, the final form of every notice to be given to the Bondholders; (xiii) in order to enable the Trustee to ascertain the nominal amount of the Bonds of each Series for the time being outstanding for any of the purposes referred to in the proviso to the definition of “Outstanding” in Clause 1, deliver to the Trustee within five (5) Business Days (upon being so requested in writing by the Trustee) a certificate in writing signed by two of its Directors, setting out the total number and aggregate nominal amount of the Bonds of each Series issued which:
(a) up to and including the date of such certificate have been purchased by the Issuer, any Subsidiary of the Issuer, any holding company of the Issuer or any other Subsidiary of such holding company, and cancelled; and
(b) are, as at the date of such certificate, held by or for the benefit of or on behalf of, the Issuer, any Subsidiary of the Issuer, any holding company of the Issuer or any other Subsidiary of such holding company;
(c) procure that the Trustee make copies of this Deed available for inspection by Bondholders at its offices as well as the then latest audited accounts (consolidated if applicable) of the Issuer;
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(d) give prior notice to the Trustee of any proposed redemption and, if it shall have given notice to the Bondholders of its intention to redeem any Bonds, duly proceed to redeem Bonds accordingly; and
(e) prior to making any modification or amendment or supplement to this Deed, procure the delivery of (a) legal opinion(s) as to the applicable provisions of the relevant Nigerian law, addressed to the Trustee, dated the date of such modification or amendment or supplement, as the case may be, and in a form acceptable to the Trustee from legal advisers acceptable to the Trustee;
20. POWERS, RIGHTS, DUTIES AND RELIEFS OF THE TRUSTEE
20.1 Subject to the provisions of this Deed, the Trustee shall enjoy all powers, reliefs, and indemnities of Trustee preserved under the Trustee Act and all other applicable laws for the time being in force.
20.2 The Trustee shall have the power to do any act in accordance with this Deed, the relevant Supplemental Trust Deed, the ISA and any applicable law which shall be on behalf of and for the benefit of the Bondholders.
20.3 The Trustee shall have the following duties and responsibilities:
(i) to act in accordance with the provisions of this Deed, the relevant Supplemental Trust Deed, the ISA, the Trustee Act and any applicable law and safeguard the rights of the Bondholders for the Issuer‟s obligations under the Programme; (ii) to summon, as and when necessary, meetings of all Bondholders of a Series whereat a statement of affairs on the management of any funds standing to the Trustee‟s credit on behalf of the Bondholders shall be presented, and or any other necessary business and or matter shall be presented and determined. A meeting shall be convened by the giving of at least twenty-eight (28) clear days written notice to all Bondholders (specifying the agenda at the meeting), and the said notice shall also be published in at least two (2) national newspapers. The procedure of and regulations for such a meeting of the Bondholders shall be in accordance with Schedule 1 of this Deed; (iii) not to enter into contracts or other arrangements that would amount to a conflict of interest in the performance of its obligations under this Deed, or any other customary obligations of the trustee. (iv) Prior to an Event of Default and after the remedying or waiving of all Events of Default which may have occurred, the Trustee shall not be liable except for the performance of such duties as specifically set down herein.
20.4 The Trustee shall have no liability for any act or omission to act hereunder, or under any other instrument or document executed pursuant hereto except for the Trustee‟ negligence and misconduct.
20.5 The duties and obligations of the Trustee shall be determined solely by the express provisions hereof, and no implied powers, duties or obligations of the Trustee, save as mandated by the ISA, the Trustee Act or any other applicable law, shall be construed into this Deed.
(i) Upon the occurrence of an Event of Default, the Trustee shall subject to the provisions of this Deed, exercise such rights and utilise such powers vested in it under this Deed, the
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Trustee Act and the ISA, and shall use the required degree of care and skill in the exercise of their duties. (ii) The Trustee shall not be required to expend or risk their own funds or otherwise incur any liability in the performance of their duties or in the exercise of their rights or powers as Trustee, except such liability may have occurred through their negligence and misconduct.
20.6 It is hereby expressly agreed and declared as follows:
(i) the Trustee, acting reasonably and in good faith, may in relation to this Deed, act on the opinion or advice of, or any information from any solicitor, valuer, surveyor, broker, auctioneer, accountant, or other expert, whether obtained by the Issuer or by the Trustee, and shall not be responsible for any loss occasioned by their reliance on such opinion, advice or information; and any such advice, opinion or information may be obtained or sent by letter, facsimile or electronic mail;Provided that the Trustee shall be liable where it acted negligently in taking action based on any such opinion or where there is manifest error in the opinion that the Trustee relied upon or sought to rely on. (ii) the Trustee shall not be responsible for the monies paid by Bondholders for the Bond or Debt Securities or be bound to see to and or monitor the application thereof; (iii) save as herein otherwise provided, the Trustee shall not be bound to take any steps to ascertain whether any event has happened upon the occurrence of which any Series of Bonds may be declared immediately repayable; (iv) the Trustee shall not be responsible for having acted upon any resolution passed at a duly convened, properly constituted meeting of the Bondholders in respect whereof minutes have been made and signed, even though it may subsequently be found that there was some defect in the constitution of the meeting or the passing of the resolution with the effect that the resolution was not valid or binding upon the Bondholders; Provided that the Trustee shall be liable in the event of manifest error in the constitution of the said meeting. (v) Without prejudice to the right of indemnity conferred by law on Trustee, the Trustee and every attorney, manager, agent or other person appointed by them hereunder shall be entitled to be indemnified by the Issuer in respect of all liabilities and agreed expenses incurred by them or him in the execution of the powers and trusts hereof or of any powers, authorities or discretions vested in them or him pursuant to this Deed provided that the Trustee has not been grossly negligent or has acted in default of their powers;
20.7 Without prejudice to the jurisdiction of any competent court, the Trustee shall have the full powers to determine all questions and doubts arising in relation to any of the provisions hereof, (whether or not the same shall relate in whole or in part to acts or proceedings of the Trustee hereunder);
20.8 The Trustee shall not be liable for any act pursuant to or under this Deed, save only for any breach of trust committed by them, provided that nothing contained in this clause shall exempt the Trustee from or indemnify it against any liability for breach of trust where the Trustee fail to show the degree of care and diligence required of them, having regard to the provisions hereof conferring on it any powers, authorities or discretions;
20.9 The Trustee may employ and pay an agent, whether a solicitor or other person, to transact or concur in doing all acts required to be done by the Trustee, including the receipt and payment of money, and any such person shall be entitled to charge and be paid all usual professional fees
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and other charges, provided however that the Trustee shall not thereby be discharged of its responsibility or liability for all such acts;
20.10 The Issuer shall reimburse the Trustee in so far as may be lawful in respect of all costs and agreed expenses incurred by the Trustee in relation to or arising out of any application made to any court by the Trustee or any of the Bondholders for an order that the trust hereof may be carried out under the direction of the court or for an order or declaration relating to the administration of the trust hereof or the enforcement of the rights hereunder of the Trustee or the construction of this Deed;
20.11 In the absence of bad faith and negligence on the part of the Trustee, the Trustee may conclusively rely upon and shall be protected in acting or refraining from acting upon any document, including but not limited to any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by proper officials of the Issuer relating to any matter primarily within the knowledge of the Issuer, the Bondholders or agents or attorneys of the Bondholders, as sufficient evidence thereof; provided that in the case of any such document specifically required to be furnished to the Trustee hereby, the Trustee shall be under a duty to examine the same to determine whether they conform to the requirements thereof. The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, or other paper or document submitted to the Trustee; provided however that the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may deem prudent;
20.12 The Trustee shall be entitled to assume without enquiry, in the absence of knowledge by or express notice to it to the contrary, that the Issuer is duly performing and observing all the covenants and provisions herein contained which are to be performed and observed by the Issuer and it shall be in the discretion of the Trustee whether to take any action or proceedings or to enforce the performance thereof, and the Trustee shall not be bound to declare any Series of the Bonds immediately repayable or to take any steps to enforce payment thereof or any of the provisions of this Deed unless and until in any of such cases the Trustee are required to do so in writing by the registered Bondholders of at least three quarters (¾) of the nominal value of the Bond or Debt Securities or by an Extraordinary Resolution passed at a duly convened meeting of Bondholders; Provided that the Trustee shall in any case inform the Bondholders of the happening of any Event of Default that comes to its knowledge;
20.13 The Trustee in the exercise of the powers and discretions vested in them pursuant to this Deed shall comply with the provisions of the ISA, the Trustee Act and any other applicable law.
21. TRUSTEE’S LIABILITY
Nothing in this Deed shall in any case in which the Trustee has failed to show the degree of care and diligence required of them as Trustee having regard to the provisions hereof conferring on them any trusts, powers, authorities or discretions exempt the Trustee from or indemnify them against any liability for breach of trust in relation to their duties under the provisions of this Deed.
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22. TRUSTEE DEALING WITH THE ISSUER AND ITS SHARES AND SECURITIES
Subject to the provisions of the ISA and Section 187 of CAMA, any body corporate which is for the time being Trustee hereof shall be at liberty in the ordinary course of its business, and every director, other officer or servant of any body corporate shall be at liberty, to enter into contracts with or hold any office of profit under the Issuer or any subsidiary of the Issuer to hold, purchase, sell, underwrite or otherwise deal with any of the Bonds or any other debenture stock, shares, securities and other obligations of the Issuer or of any such subsidiary and to act as obligations of the Issuer or of any such subsidiary and to act as Trustee of any other securities or obligations of the Issuer or of any such subsidiary without being accountable for any receipt profits interest charges commission arising there from.
23. NO CROSS DEFAULTS
There shall be no rights of cross default with respect to the Bonds. Subject to Condition 7, a cross default with respect to a Series of Bonds shall not cause an Event of Default with respect to any other Series of Bonds unless such event or condition on its own also constitutes an Event of Default with respect to such other Series of Bonds pursuant to Condition 7 hereof.
25. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE
The Trustee hereby warrants to the Issuer that:
(i) it is a company within the meaning of the CAMA; (ii) it is duly registered and authorised by the SEC to provide corporate trust services in Nigeria; (iii) it has the resources, capacity and expertise to act on behalf of the Bondholders with regard to every issuance of Bond or Debt Securities under the Programme and it shall comply with the provisions of the ISA, this Deed and the relevant Supplemental Trust Deeds in the performance of its obligations; (iv) it shall provide any information that the SEC or the Issuer may require in connection with its obligation to act on behalf of Bondholders; (v) it shall not allow any conflicts to occur between its obligations in connection with and under the Programme and its commercial interests; and (vi) it does not have any fiduciary relationship with the Issuer; (vii) it shall, at all times, adhere to the terms and conditions specified in this Deed.
26. REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer hereby warrants to the Trustee that the execution of this Deed and the transaction herein contemplated will not contravene the Company‟s constitutional documentation or any existing contract and that it shall do all acts and things within its powers which are necessary:
(i) to give full effect to the Bonds or Debt Securities, when issued as provided under the relevant Pricing Supplement; (ii) to establish the Bonds or Debt Securities as valid, binding and legal obligations of the Issuer according to the meaning and intent thereof; (iii) for the creation, execution and delivery of this Deed, which shall also be deemed to be a security agreement; and (iv) for the creation, execution and issuance of the Bonds or Debt Securities, subject to the terms hereof;
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27. NEW TRUSTEE
The power to appoint a new trustee under the provisions of this Deed shall be vested solely in the Issuer. One or more persons may hold office as trustee(s) under this Deed but such trustee(s) shall be a SEC registered entity. Whenever there shall be more than two trustees under this Deed, such trustees shall be competent to execute and exercise all the duties, powers, trusts, authorities and discretions vested in the trustees by the provisions of this Deed. The Issuer shall obtain the approval of SEC to appoint a new trustee under this Deed and shall as soon as practicable thereafter notify the Registrar and the Bondholders of such new appointment.
28. REMOVAL AND RESIGNATION OF TRUSTEE
28.1 The Trustee may resign as trustee at any time, by giving not less than ninety (90) days prior written notice to that effect to the Issuer, the SEC and the Bondholders, and such resignation shall not be effective until a successor to the trustee is appointed in accordance with this Deed; provided that the Trustee shall continue to hold the rights conferred and perform the obligations imposed on it by this Deed until it has effectively resigned as Trustee or a successor trustee has been appointed in place of the retiring trustee.
28.2 In addition, where any Supplemental Trust Deed so provides, the Trustee may be removed by the Issuer but only for the reasons stated in the Supplemental Trust Deed and in this Clause 28 and only so long as (a) no Event of Default shall have occurred and be continuing and (b) the removal of the Trustee shall not have any adverse effect upon the rights and interests of the Bondholders.
28.3 Where the Trustee gives notice of its resignation as trustee pursuant to Clause 28.1 hereof or in the event that the Trustee is dissolved or otherwise becomes incapable to act as Trustee or is removed as Trustee pursuant to Clause 28.2 hereof, the Issuer shall immediately appoint a successor trustee having obtained the approval of SEC. In such event, the successor trustee shall cause notice of its appointment to be issued to the Bondholders of all Bonds then outstanding. The predecessor Trustee shall remain in office until a successor Trustee is appointed. If the Trustee resigns, the resigning Trustee shall bear the costs of giving such notice. If the Trustee is removed, is dissolved, or otherwise becomes incapable of acting as Trustee, the Issuer shall bear the costs of giving such notice.
28.4 Unless otherwise ordered by a court or regulatory body having competent jurisdiction, or unless required by law, any successor trustee appointed by the Issuer shall be a company, authorised to carry on trust business in Nigeria and duly registered with the SEC to provide corporate trust services.
Every successor trustee shall execute, acknowledge and deliver to its predecessor and also to the Issuer an instrument in writing, accepting such appointment hereunder, and thereupon such successor trustee, without further action, shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor, and such predecessor shall execute and deliver an instrument transferring to such successor trustee all the rights, powers and trusts of such predecessor. The predecessor Trustee shall execute any and all documents necessary or appropriate to convey all interest it may have to the successor trustee. The predecessor Trustee shall promptly deliver all records relating to the trust and copies thereof and communicate all material information it may have obtained concerning the trust to the successor trustee and shall duly provide the successor trustee with a full and updated statement of affairs and accounts of the trust in respect of each Series of Bonds.
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29. UNDESIRABLE SITUATIONS AND PRACTICES
29.1 For the purpose of this Deed, an undesirable situation or practice is a situation or practice which may prejudice the interests of the Bondholders. These include:
(i) an order by a court of competent jurisdiction or a company resolution passed for the dissolution of or appointment of an administrator for any of the Trustee (otherwise than in the course of a reorganisation or restructuring of such trustee on a solvent basis); (ii) where any person takes any step, and such is not withdrawn or discharged within sixty (60) days, to appoint a liquidator, manager, receiver, administrator, administrative receiver or other similar officer in respect of any assets of any of the Trustee; (iii) where the Trustee convenes a meeting of its creditors or makes or proposes any arrangement or compromise with, or any assignment for the benefit of, its creditors.
29.2 If the Issuer has reasonable belief that an undesirable situation or practice has developed or is developing regarding the activities of the Trustee, the Issuer may take any steps to correct the situation or practice, including:
(i) notifying the SEC within five (5) days of such practice coming to the attention of such Issuer; (ii) with the approval of the Directors of the Issuer and by a majority decision of all the Bondholders present at a meeting duly called for that purpose, suspend the Trustee and appoint another trustee to act in place of the suspended Trustee during the period of suspension; (iii) with the approval of the Directors of the Issuer and by a majority decision of all the Bondholders, terminate the appointment of the Trustee and immediately appoint a new trustee in accordance with the provisions of this Deed; (iv) giving directions to the Trustee to act in such a manner as will correct or assist in overcoming the situation or practice; or (v) taking any other action it considers necessary to assure and safeguard the interests of the Bondholders.
30. CONFIDENTIALITY
30.1 The Trustee hereby agree that during the course of its engagement under this Deed, they are likely to obtain knowledge of confidential information with regard to the affairs of the Issuer and its agencies, details of which are not in the public domain (“Confidential Information”), and accordingly the Trustee hereby undertake and covenants with the Issuer that they shall:
(i) not at any time, use any Confidential Information except for the purpose of performing their duties under this Deed; (ii) not at any time during the subsistence of, or after the termination of this Deed (save as required by law or judicial order), disclose or divulge any Confidential Information to any person other than to officials of the Issuer who are authorized to have access to such Confidential Information; (iii) promptly notify the Issuer if they become aware of any breach by it or any Responsible Officer of any of the provisions of this Clause 30
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(iv) use their best endeavours to prevent the publication or disclosure of any Confidential Information by any person under their control.
(v) upon receipt of a written request from the Issuer, return to the Issuer, all Confidential Information provided.
30.2 The restrictions set out in Clause 30.1 above shall cease to apply to information or knowledge which comes into the public domain otherwise than by reason of the default of the Trustee.
30.3 Any Confidential Information shall be held in confidence, and the Trustee shall indemnify the Issuer for any costs, damages or losses suffered by the Issuer as a result of the breach of the obligations stated in this Clause 30
30.4 The restrictions set out in this Clause 30 shall continue to apply notwithstanding the termination of this Deed, save for Clause 30.1.ii which shall only apply for a period of four (4) years after the termination of this Deed.
31. NOTICES
31.1 Any notice, request, requirement, stipulation or other document or matter to be given, issued or made under this Deed shall be in writing and shall be signed by the person giving, issuing or making it or that person's authorised agent or representative and shall be served in accordance with Clause 31.2 below.
31.2 Any notice or other document referred to in Clause 30.1 above, shall be served by personally delivering the same by hand to the registered office or to the address of the person to be served as specified in this Deed or previously notified for this purpose, or by sending the same by a reputable courier service to such address or by dispatching the same by legible facsimile transmission or other means of communication in permanent written form, and due service shall be deemed to have been made at the time of actual receipt, save that in the case of any facsimile transmission sent after 4.30 pm, it shall be deemed to have been served at 9.00 am on the next Business Day.
The respective addresses for notices are as follows:
The Issuer: Nigerian Aviation Handling Company Plc nahcoaviance House Murtala Muhammed International Airport Ikeja, Lagos Attention: Mr Kayode Ojo Telephone: 01-7741161-65, 01-7402000 Email: [email protected]
The Trustee: First Trustees Nigeria Limited G. Leventis Building (2nd Floor) 42/43 Broad Street Lagos Attention: Frederick Obodozie Telephone: 01-4622834 Email: [email protected]
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32. TERMINATION AND DURATION
32.1 This Deed shall commence on the date of execution and shall continue in full force and effect until terminated upon the happening of any of the following events:
(i) the date on which the Bondholders are no longer entitled to payment of Principal Amount or Coupon pursuant to the terms of this Deed, the Issuer having exercised its redemption rights; (ii) after the issue of the last Tranche of Bonds, when all of the payments for the Bonds shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Bondholders in accordance with the terms of this Deed; or (iii) Upon termination of the trust and conclusion of payment(s) to the Bondholders and/or Trustee, any assets outstanding in the Trust shall be returned to the Issuer.
32.2 Regardless of the term specified in Clause 32.1, this Deed may be terminated where:
(i) there is a material breach by the Issuer of its obligations under this Deed and the Trustee have given the Issuer [3] months‟ notice in writing of its intention to terminate this Deed; (ii) the appointment of the Trustee is terminated in accordance with the provisions of this Deed; (iii) in the considered opinion of the Issuer, any of the circumstances specified under Clause 29.1 hereof makes the fulfilment of the Trustee obligations under this Deed impracticable; (iv) the Issuer receives an Extraordinary Resolution passed by Bondholders of the Bonds or Debt Securities issued under any Series of the Programme, requesting that the appointment of the Trustee be determined; or
32.3 In the event of the termination of this Deed or the removal of the Trustee in accordance with the provisions hereof, the Trustee shall immediately account for and deliver up the NAHCO DSRA to NAHCO or to its appointed successor or successors. A Trustee shall continue in office until a successor has or successors have been duly appointed to take over its obligations herein.
33. SEVERABILITY
In the event that any one or more of the provisions contained in this Deed is for any reason, held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Deed shall be construed as if such invalid, illegal or unenforceable provision were not contained herein and in such event, the Parties shall endeavour to carry out the terms of this Deed as nearly as possible in accordance with its original terms and intent.
34. ENTIRE AGREEMENT
This Deed constitutes the entire agreement between the Parties hereto and supersedes all prior understandings between the Parties, whether oral or written. The terms of this Deed shall not be altered, varied and or amended except by a written instrument duly executed by the Parties hereto.
35. COUNTERPARTS
This Deed may be executed in any number of counterparts, all of which taken together are deemed to constitute one and the same document.
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36. DISPUTE RESOLUTION
36.1 Amicable Settlement The Parties shall endeavour to amicably resolve any dispute or misunderstanding that may arise between them, in relation to the terms of this Deed.
36.2 Arbitration Where the Parties are unable to resolve any dispute amicably within fourteen (14) Business Days of holding consultations after a dispute arises, such dispute shall then be settled by arbitration in accordance with the Arbitration and Conciliation Act Cap. A18 LFN 2004.
The arbitration panel shall consist of three (3) arbitrators, one appointed by each Partyhereto, and the third who shall preside over the Panel, shall be appointed by the two (2) arbitrators appointed by the Parties. Where the 2 appointed arbitrators are unable to agree on the choice of the third arbitrator within 2 working days after their own appointments, the choice of the third arbitrator shall be referred to the Director General of the SEC, who shall nominate the third arbitrator. The arbitral proceedings shall be held in Lagos, Nigeria, and shall be conducted in the English language.
The arbitrators shall have a maximum period of ten (10) working days following the Parties‟ exchange of pleadings, to resolve the dispute; failing which the said dispute shall be referred to the SEC for resolution.
36.3 Any Party aggrieved by the decision of the SEC reached in accordance with Clause 36.2 (b) may refer the matter to the Investments and Securities Tribunal established in accordance with the provisions of the ISA, for resolution.
36.4 Each Party shall bear the cost and expenses of the arbitrator appointed by it while the costs and expenses of the third arbitrator shall be borne in equal proportions by both parties.
36.5 This Clause 36 shall be severable from the rest of this Deed and shall remain effective if this Deed is cancelled or terminated.
37. CONFLICT
In the event of a conflict between the provisions of this Deed and a Supplemental Trust Deed, the provisions of such Supplemental Trust Deed shall prevail.
38. GOVERNING LAW
This Deed shall be governed by, and construed in all respects, in accordance with the laws of the Federal Republic of Nigeria.
39. WAIVER
Without prejudice to the provisions of this Deed, the Trustee may, without the consent of the Bondholders and without prejudice to their rights in respect of any subsequent breach, from time to time and at any time, if in its opinion the interests of the Bondholders will not be materially prejudiced thereby, waive or authorise, on such terms as seem expedient to it, any breach or proposed breach by the Issuer of this Deed or the Conditions or determine that an Event of Default or Potential Event of Default shall not be treated as such provided that the Trustee shall not do so in contravention of an express direction given by an Extraordinary Resolution or a request made pursuant to Condition 7. No such direction or request shall affect a previous waiver, authorisation or determination. Any such waiver,
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authorisation or determination shall be binding on the Bondholders and shall be notified to the Bondholders as soon as practicable.
40. MODIFICATION
Without prejudice to the provisions of this Deed, the Trustee may agree with the Issuer, without the consent of the Bondholders but subject to the SEC being notified, to any modification to this Deed of a formal, minor or technical nature or to correct a manifest error. The Trustee may also so agree to any modification to this Deed that is in their opinion not materially prejudicial to the interests of the Bondholders.
SCHEDULE 1
PROVISIONS FOR MEETINGS OF THE BONDHOLDERS
1.Meetings of Bondholders
The Issuer or the Trustee respectively may at any time at their discretion , and the Trustee shall on the requisition in writing of the Bondholders holding not less than three-quarters (¾) of the nominal amount of the Bonds or Debt Securities for the time being outstanding and upon being indemnified to its satisfaction against all costs and expenses to be incurred thereby, convene a meeting or meetings of the Bondholders in accordance with the provisions of this schedule to discuss and determine any matter affecting their interest. Any such meeting shall be held at such place as the Trustee shall determine or approve.
Bondholders of at least 10% of the nominal value of the Bond or Debt Securities for the time being outstanding shall be entitled to convene a meeting at which a resolution to compel the Trustee to take steps against the Issuer will be passed, upon the occurrence of an Event of Default. Provided that the Trustee‟s act, will be subject to Condition 7 of this Deed.
2.Notice of Meetings
A meeting of the Bondholders may be called by giving not less than twenty-eight (28) days‟ notice in writing.
A meeting may be called after giving shorter notice than that specified above if consent is accorded thereto by Bondholders holding not less than seventy-five per cent (75%) of the nominal amount of the Bond or Debt Securities for the time being outstanding.
Every notice of a meeting shall specify the place, the day and hour of the meeting and shall contain a statement of the business to be transacted and the terms of every resolution to be proposed thereat.
The Notice of every meeting shall be given to:
(i) every Bondholder;
the person entitled to the Bond or Debt Security in consequence of the death, insolvency, winding-up or dissolution of a Bondholder by sending it through the post in a pre-paid letter addressed to him by name or by the title of the representative of the deceased or assignee of the insolvent or by any like description at the address (if any) supplied for the purpose by the person claiming to be so entitled, or until such an address has been so supplied by giving the notice in any manner in which it might have been given if the death, insolvency, winding-up or dissolution had not occurred;
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(ii) to the Registrar; to the Trustee when the meeting is convened by the Issuer; and
(iii) the Issuer. The accidental omission to give notice to or the non-receipt of notice by any Bondholder or other person to whom it should be given shall not invalidate the proceedings of the meeting.
3.Quorum
Any two or more persons holding or representing by proxy at least one-quarter (¼) of the nominal amount of the Bond or Debt Securities for the time being outstanding shall be a quorum for the conduct of business at a meeting of the Bondholders unless the business of the meeting includes the consideration of an Extraordinary Resolution, in which event the necessary quorum shall be two (2) or more persons holding or representing by proxy a simple majority of the nominal amount of the Bond or Debt Securities for the time being outstanding and no business shall be transacted at any meeting unless the requisite quorum shall be present when the meeting proceeds to business.
If within an hour from the time appointed for holding the meeting a quorum is not present, the meeting, if called upon the requisition of Bondholders, shall stand dissolved. In any other case the meeting shall stand adjourned to such day and time not being less than seven (7) days thereafter and to such place as the Chairman may determine.
At least three (3) days notice of any adjourned meeting shall be given in the same manner as for an original meeting, but it shall not be necessary to specify in such notice the business to be transacted at the adjourned meeting. Any two (2) or more persons being Bondholders or holding proxies for Bondholders whatever the amount of Bond or Debt Securities held by them, shall be a quorum for all purposes including the passing of Extraordinary Resolutions and to decide upon all matters which could properly have been disposed of at the meeting from which the adjournment took place.
4.Chairman of Meeting
The Trustee or such other person nominated by the Trustee shall be entitled to take the chair at every meeting and if no such nomination is made or if at any meeting the Trustee or the person nominated shall not be present within thirty (30) minutes after the time appointed for holding the meeting the Bondholders personally present shall on a show of hands elect one of themselves to be the Chairman thereof.
If a poll is demanded on the election of the Chairman it shall be taken forthwith and the Chairman elected on a show of hands shall exercise all the powers of the Chairman until the result of such poll is declared.
If some other person is elected Chairman as a result of the poll he shall be the Chairman for the remainder of the meeting.
5.Attendance at Meetings
In addition to the Bondholders, the Trustee, their solicitors, the Issuer and any authorised officer of the Issuer and any other person authorised in that behalf by the Trustee may attend any meeting but shall not be entitled to vote thereat.
6.Evidence of Passing of Resolution
A resolution or any question put to the vote of the meeting shall be decided on a show of hands unless a poll is demanded in the manner hereinafter mentioned, and unless a poll is so demanded a declaration by the Chairman that on a show of hands the resolution has been carried either unanimously or by a particular majority or lost and an entry to that effect in the books containing the minutes of the proceedings of the meeting, shall be conclusive
71 13. STATUTORY AND GENERAL INFORMATION evidence of that fact without proof of the number or proportion of the votes cast in favour of, or against such resolution.
7.Demand of Poll
Before or on the declaration of the result of the voting on any point or question on a show of hands, a poll may be ordered to be taken by the Chairman of the meeting on his own motion, and shall be ordered to be taken by him on demand made in that behalf by at least five (5) Bondholders having the right to vote on the resolution and present in person or by proxy or by the holders of not less than one-quarter (¼) in nominal amount of the Bond or Debt Securities for the time being outstanding.
The demand for a poll may be withdrawn at any time prior to such poll being taken by any person or persons who made the demand.
8.Taking a Poll
A poll demanded on a question of adjournment shall be taken forthwith.
A poll demanded on any other question (not being a question relating to the election of a Chairman as provided for in Paragraph 4 hereof) shall be taken in such manner and at such time not being later than thirty (30) days from the time when the demand was made, as the Chairman may direct.
9.Voting
On a show of hands, every Holder who (being an individual) is present in person or by proxy or (being a body corporate) is present by its duly authorised representative shall have one (1) vote, and on a poll every Holder who is present in person or by proxy shall have one (1) vote in respect of every unit of the Debt Security of which he is the holder.
10.Representative of Corporate Bondholders
Any body corporate which is a Holder may by writing under the hand of a duly authorised officer authorise such person as it thinks fit to act as its representative at any meeting of the Bondholders and the person so authorised shall be entitled to exercise the same powers on behalf of the body corporate which he represents as that body corporate could exercise if it were an individual Holder.
11.Proxies
The registered Holder or in the case of joint holders any one of them shall be entitled to vote in respect thereof either in person or by proxy and in the latter case, as if such one joint Holder was solely entitled to such Bond or Debt Securities. A registered Holder shall be entitled to appoint another person (whether a Holder or not) as his proxy to attend a meeting and vote thereat instead of himself.
In every notice calling a meeting of the Bondholders there shall appear with reasonable prominence a statement that a Holder entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of himself and that a proxy need not be a Holder. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a notarized copy of the power of authority, shall be deposited at such place as may be specified in the notice convening the meeting or in some document accompanying the same or if no place is so specified then at the office of the Registrars for the time being, not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or in the case of a meeting at which a poll is to be taken, not less than twenty-four (24) hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid.
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The instrument appointing a proxy shall:
(i) be in writing in the usual common form or such other form as the Trustee may approve; and (ii) be signed by the Holder so appointing or his attorney duly authorised in writing or if the Holder so appointing is a body corporate be under its seal or be signed by an officer or any attorney duly authorised by it. No instrument appointing a proxy shall be valid after the expiration of twelve (12) months from the date named in it as the date of execution. An instrument appointing a proxy shall be deemed to confer authority to demand or to join in a demand for a poll.
Every Holder entitled to vote at a meeting of the Bondholders or on any resolution to be moved thereat shall be entitled, during the period beginning twenty-four (24) hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect by himself or through a duly authorised person, the proxies lodged at any time during the business hours of the Registrar, provided that not less than three (3) days‟ notice in writing of the intention so to inspect is given to the Registrar.
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or the revocation of the proxy or of the authority under which the proxy was executed, provided that no intimation in writing of such death, insanity or revocation shall have been received by the Trustee at its registered office before the commencement of the meeting or adjourned meeting at which the proxy is used.
12.Entitlement of Bondholder to Vote Differently
On a poll taken at a meeting of the Bondholders, a Bondholder entitled to more than one vote, or his proxy or other person entitled to vote for him as the case may be, need not, if he votes, use all his votes or cast all his votes in the same way.
13.Scrutineers at Poll
Where a poll is to be taken the Chairman of the meeting shall appoint two (2) scrutineers to scrutinize the votes given on the poll and to report thereon to him.
The Chairman shall have power at any time before the result of the poll is declared to remove a scrutineer from office and to fill vacancies in the office of scrutineer arising from such removal or for any other cause.
Of the two (2) scrutineers appointed under this clause at least one such scrutineer shall always be a Holder present at the meeting, provided that such a Holder is available and willing to be appointed.
14.Manner of Poll and result thereof
The Chairman of the meeting shall have power to regulate the manner in which a poll shall be taken, and shall declare the result thereof.
15.Voting by Joint Bondholders
In the case of joint Bondholders the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of other joint Bondholders; and for this purpose seniority shall be determined by the order in which the names stand in the Register of Bond or Debt Securities.
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16.Adjournment of Meeting
The Chairman of a meeting of the Bondholders (may with the consent of and shall, if directed by any such meeting at which a quorum is present), adjourn the same from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than business which might lawfully have been transacted at the meeting from which the adjournment took place.
17.Casting Vote
In the case of equality of votes whether on a show of hands or a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote in addition to the votes to which he may be entitled as or on behalf of a Holder.
18.Proceedings and Demand for Poll
The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.
19.Chairman as Sole Judge
The Chairman of any meeting shall be the sole judge of the validity of every vote tendered at such meeting, and the Chairman present at the taking of a poll shall taking the advice of the scrutineers, be the sole judge of the validity of every vote tendered at such poll.
20.General Meetings
A meeting of the Bondholders shall inter alia have the following powers which shall only be exercisable by Extraordinary Resolution:-
- to sanction the release of the Issuer from all or any part of the principal moneys and coupon owing on the Bond or Debt Securities;
- to sanction any modification or compromise or any agreements in respect of the rights of the Bondholders against the Issuer whether such rights shall arise under this Deed or a Bond Certificate or otherwise;
- to assent to any modification of the provisions contained in this Deed proposed or agreed by the Issuer;
- to give any sanction, direction or request which under any of the provisions of this Deed is required to be given by Extraordinary Resolution;
- to authorise and empower the Trustee to concur in and execute and do all such deeds, instruments, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution;
- to give any release to the Trustee in respect of anything done or omitted to be done by the Trustee hereunder before the giving of the release.
21.Resolution Binding
A resolution passed at a meeting of the Bondholders duly convened and held in accordance with this Deed shall be binding upon all the Bondholders whether present or not present at such meeting, and each of the Bondholders shall be bound to give effect thereto accordingly, and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof, the intention being that it shall rest with the meeting to determine without appeal, whether or not the circumstances justify the passing of such resolution.
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22.Minutes of Meetings
Minutes of all resolutions and proceedings at such meeting as aforesaid shall be made and duly entered in the books to be provided from time to time for that purpose by the Trustee at the expense of the Issuer, and every such minutes as aforesaid if signed by the Chairman of the meeting at which such resolutions were passed or proceedings had or by the Chairman of the next succeeding meeting of the Bondholders shall be conclusive evidence of the matters therein contained, and until the contrary is proved every such meeting or proceedings in respect of which minutes have been signed as aforesaid shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings taken to have been duly passed and taken.
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Table 3: Schedule of equipment to be purchased with the Proceeds:
EQUIPMENT No. AC UNIT (W.B) 3 AIR START UNIT 4 BAGGAGE CARTS 40 BELT LOADER 6 CONTAINER DOLLIES 80 FUEL BOWSER 1 GROUND POWER UNIT (N.B) 3 GROUND POWER UNIT(W.B) 9 HIGH LOADER (LOWER DECK) 6 HIGH LOADER (LOWER DECK) CMMDR 15i 2 HIGH LOADER (MAIN DECK) 5 MOBILE WORKSHOP 1 PALLET DOLLIES 100 PASSENGER STEP 12 PUSH BACK (CONVENTIONAL) WIDE BODY 2 TOILET BOWSER (MOTORISED) 3 TOW BAR (A300) 2 TOW BAR (A346) 1 TOW BAR (B727) 2 TOW BAR (B747) 2 TOW BAR (B757) 2 TOW BAR (B767) 1 TOW BAR (MD11) 1 TOW TRACTOR 15 WATER BOWSER (MOTORISED) 5 308
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