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Energy finance: Oando makes history upstream in Nigeria

The financing of Nigerian energy company Oando’s acquisition of a 49.8% stake in two offshore oil blocks owned by Royal Dutch Shell was due to close at the end of March, according to Wale Tinubu, the company’s group chief executive.

The transaction marks the first time a local company has bought oil production assets from a multinational operating in Nigeria.

The $625 million deal consists of $250 million equity from Oando, a senior debt portion of $200 million linked to the field’s reserves, and a mezzanine portion of $175 million. Financing has been arranged by a consortium of banks led by Standard Chartered and including Merrill Lynch, Standard Bank and BNP Paribas. Both loans have a maturity of five years. The senior debt will be paid down on a quarterly basis from existing oil production. The mezzanine loan carries a higher interest rate, a moratorium on principal repayment in the first year and the option of deferred interest payments.

"Everything is fully underwritten," says Tinubu. Oando plans additional capital-raising, particularly in the local markets, although Tinubu is unwilling to divulge exactly what form it will take. "We will exploit and exhaust Nigerian opportunities," he says.

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