Nigerian Eagle Airlines, freshly rebranded from its previous existence as Virgin Nigeria, is planning to raise at least $185 million over the next six months.

A restructuring of Nigerian Eagle's ownership is under way following Virgin Atlantic Airways' decision to distance itself from the Lagos-based carrier. Virgin is seeking a buyer for its 49% stake in Nigerian Eagle. The remaining 51% is held by Nigerian institutional investors.

A $185 million private placement memorandum has been issued through Nigerian bank UBA Capital. The bank is itself a shareholder in the airline, but intends to reduce its holding.

"They want to be lead banker for the airline. They are in for the long term, but they have got to reduce their exposure to a sensible level," explained Nigerian Eagle chief executive Dapo Olumide at the recent African Airlines Association meeting in Maputo, Mozambique.

Consultancy Ernst & Young has meanwhile been brought in to seek out potential equity partners. There has been "a lot of interest" from the Middle East, says Olumide, but the airline is also targeting potential African investors.

Olumide expects that a private buyer would want a controlling stake of 51% or more, comprising Virgin's 49% and some of the shares held by Nigerian institutional investors.

He says the airline will ultimately choose "one or the other" between the UBA private placement, which is a debt solution, and the "straightforward equity" option through Ernst & Young.

If Nigerian Eagle goes down the equity path, it would look to raise a minimum of $200 million. Around $50 million would be used to pay back part of a $100 million convertible bond held by UBA. The remainder would be used for capital projects, such as the airline's order for seven Embraer 170s and three 190s.

Ideally Olumide is looking to convert the order to a lease arrangement, and if unsuccessful may tap rock-bottom prices to grow its Boeing 737-300 fleet. Nigerian Eagle is looking to operate a fleet of around 20 aircraft by 2011, he says, adding: "If the talks with Embraer fall apart, we will go with 20 geriatric 737-300s."

Source: Airline Business