AMCON acquires N275b bad loans of Zenon Oil, Geometric Power, Seawolf

Prompted by a desire to avert another systemic crisis in the Nigerian banking industry, the Asset Management Corporation of Nigeria (AMCON) Thursday announced it has acquired another N275billion delinquent credit from about 6 banks in respect of various transactions with three indigenous firms.

The firms whose bad debts were taken over under the arrangement include Zenon Petroleum, Geometric Power Limited and Seawolf Industries Limited. Under the arrangement which AMCON Managing Director and Chief Executive, Mr Mustafa Chike Obi said was in the best interest of the nation’s economy, the corporation purchased a total of N150billion debt owed about five banks that financial petroleum products imports by Zenon Petroleum a few years ago.

The company Daily Sun learnt has been servicing the facility promptly until disagreement arising from interest charges threw spanner into the wheel of the transaction. Banks believed to have funded the Zenon Petroleum deal include, Access Bank Plc, Guaranty Trust Bank Plc, Zenith Bank Plc, FCMB among others.

Similarly, AMCON boss hinted the corporation has concluded discussion with First Bank Plc, to take over an estimated N100billion exposure to Seawolf Industries Limited while it has also concluded transactions on the N25billion debt owed Diamond Bank by Geometric Power Systems for the financing of the Independent Power Project in Aba, Abia State.

He said ‘’Certain banks have been compelled, in consultation with AMCON, and the Central Bank of Nigeria to sell systematically important loans to AMCON to forestall any further crisis in the future. Most notable among these are loans to Zenon Petroleum, Seawolf Industries and Geometric Power Industries’’.
But given a breakdown of the transaction, Chike –Obi stated that AMCON’s involvement in the firms debt imbroglio was basically due to the usually large size of the facilities which he feared could create another systemic crisis if the debtors suddenly default.

He explained that though the loans are still performing, it would be dangerous to leave it with the banks because it could destroy the industry if nothing was done. The AMCON boss allayed fears that the corporation’s takeover of the facilities would not mean taking over the indebted companies but strengthen their governance structures and ensure that the loans are repaid promptly, stressing that this would ensure there would be no job losses while critical activities in the firms and their banks are not unduly disrupted.

Meanwhile Chike-Obi has said AMCON will conclude its acquisition of non-performing loans of banks by October 31, 2011 having injected about N1.16 trillion for the face value of an estimated N2.78trillion delinquent credit owed 21 banks in the country. This according to him also represented about 95 per cent of all outstanding non -performing loans in the nation’s banking industry.

SOURCE   http://www.sunnewsonline.com/webpages/news/businessnews/2011/oct/21/bussines-21-10-2011-001.html

Geometric Systems Inc is owned by the Minister of Power - Barth Nnaji. I am not suggesting anything, just a note.

As Aba Independent Power Project Comes Alive

By Mohammed Shosanya (Lagos)
Daily Trust, Abuja
November 8, 2007

It was pomp and ceremony last week when President Musa Yar'Adua led other dignitaries to Osisioma, near Aba in Abia State to perform foundation-laying ceremony of the Aba Independent Power Project.

The ceremony came at the nick of the time when Nigerians have traded their hopes for uninterrupted power supply in the country.

Suffice to say that in the last eight years of the previous administration, the power sector grew worse inspite of the controversial expenditure sunk on it and noises about improved power supply existed only in rhetorics.

And when the new administration came on board and promised to declare a state of emergency on the enmeshed power sector, many Nigerians praised President Yar'Adua to high heavens.

Things have not taken shape hitherto. Power supply is still elusive and Nigerians seem to have negotiated again there hopes for improved power sector under this fresh administration.

But,the foundation laying ceremony for the Aba Independent Power Project may have rekindled the hope of Nigerians that the days of interrupted power supply are numbered.

The Aba Independent Power Project (IPP) is spearheaded by an indigenous company, Geometric Power Limited, owned by the former Minister of Science and Professor of Robotic Engineering, Professor Bartholmew Nnaji.

Apart from the Aba IPP,the company has a sterling record having successfully built a 22 megawatts Abuja Emergency Power Project in 2001,which currently lit up the seat of power and its environs.

Besides, the project which will gulp a princely S250million,is targeted at supplying 140megawatts of electricity to the national grid. The funding of the project is a concerted efforts of local and foreign financial institutions that will pool their resources and expertise together to ensure that it came to life and satisfy the needs of Nigerians.

Among the financial institutions which have given their nod to partake in the project include; the International Finance Corporation (IFC), European Investment Bank[EIB] and African Finance Corporation[AFC].

Also, the foremost power specialist from Canada, Mr. Paul Nickson, is said to have been hired by the indigenous company to perfect the Aba IPP. Speaking at the foundation ceremony last week in Aba, President Yar'Adua described the project as the first major investment by a Nigerian in diaspora.

The President, who was represented by the Minister of State for Energy and Gas, Mr. Emmanuel Odusina said. "The successful completion, operation and management of the project will, no doubt, be a reference point in the nation's history of power generation,distribution and transmission"

According to the Governor of Abia State, Theodore Orji, the project would aid the revival of industries that were closed in Aba and other towns due to epileptic power supply.

While commending Geometric for siting the project in the state, Orji pledged the government's support for the project and warned the host communities against sabotage, harassment and intimidation of workers at the site of the project.

Both Special Assistant to the President on Power, Joseph Makoju and the Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr Ransome Owan, described the project as a veritable and potent force to change the face of the dwindling power generation in the country.

And to demonstrate the commitment and seriousness of Geometric Limited to smoothsail the project, its Chairman, Professor Barthol-omew Nnaji, noted in his speech at the occasion that an extensive environmental impact assessment of the project had been conducted, adding that the plant would commence operations in a year's time.

Report from Aba indicates that businessmen, investors and the likes have already embraced the project and have expressed willingness to work with the company to ensure its success.

One could only hope that the present administration provides more latitudes and enabling environments for private investors to invest in the power sector with a view to rescuing it from needless abyss.

Seems shady. How is this ethical?

Is Mustapha Chike Obi not the son of the popular mathematician, Prof Chike Obi?
They are acquiring everything acquirable shay?

What are they really saying, are the loans performing or not? The story is a bit confusing. On one hand, it says they were performing; in another breath, it says they were delinquent.

If Zenon's default arose as a result of disagreement on interest payment, why can't the company be paying back the principal payments that were not in doubt? Why move the loan to AMCON? And is the prime mover of Zenon (Otedola) not a member of the Economic Team in the same way that poster Koruji has noted that Geometric belongs to a sitting Minister?

Since the rate at which AMCON will take over the loans is much less than the face value, I expect the shareholders of the affected banks (especially Seawolf's N100billion) to speak on this matter. Did the approval of Seawolf's credit in FirstBank coincide with when Sanusi Lamido was the ED, Risk or the MD of FirstBank? Note that this is what he has severely punished other bank chiefs for.

Also, have those banks not been making provisions (partial or full) on those loans? If they have made full provisions, why the need for a take over (especially at a discount)? Why not pursue recovery? Or is there no hope of recovery in which case a number of issues will come up.

Nigerians (tax payers) whose monies are funding AMCON should also be interested in what AMCON buys and should ask questions.

Why were the banks 'compelled' to sell the loans to AMCON after they must have made provisions?

This one looks like an interesting topic. Where are the pro and anti SLS people?

Mod, abeg move to front page make man gbadun this one for weekend.

Seems like corruption to me for the FG to buy the bad loan of the minister of power.

That would be scandalous at least where I live

^^^It is also scandalous in Nigeria but I guess it's been done very quietly without the 'fanfare' that attended the takeover of the toxic loans of other banks whose chiefs Sanusi said ought to have been shot. Whichever way you look at it, the take-over of Geometric loan (owned by the current Minister of Power), Zenon (owned by a current member of the Economic Team), and Seawolf (approved while the current CBN Governor was either the ED, Risk or MD/CEO of First Bank) without clear explanations or guidelines amounts to a conflict of interest.

Why did the CBN compel AMCON to takeover the loans at a discount? Is CBN saying there are no more such 'large' or systemically important loans in the banking system?

Were the loans performing or not? How much was approved by each bank in favour of the respective companies and what was the outstanding balance on each one? Is AMCON supposed to takeover performing loans?

How much was the entire toxic loans in the defunct FINBANK or Bank PHB compared to the volume of Seawolf's loan alone or to Seawolf plus Zenon plus Geometric?

One thing is clear on this matter: there are more questions than answers.

About 5 banks gave out a loan of N150b to Zenon and CBN/AMCON wakes up to say it is an 'unusually large' loan. So if this becomes a precedent, it means banks won't syndicate such 'large loans' again?
This is in spite of assurances that Nigerian banks are now well-capitalized to fund big ticket transactions.

I have a feeling that something is wrong here.

Zenon/Otedola will benefit from the FG "buying" their loan, ditto Geometric which has strong ties/links with Barth Nnaji the Minister of Power. Some things never change eh?

^^^Things are not changing Crownvilla, except against those who have fallen out of favour.

I actually want someone to show that this transaction was transparent. For now, there's little or nothing to show that.

AMCON buys Zenon, two others’ N275b debt


Read (133)



October 21, 2011 / By Kingsley Ighomwenghian, Finance Editor

•May compensate owners of nationalised banks
•Companies are Zenon Petroleum (N150bn), Seawolf Oilfield Services Limited (N100bn) and Geometric Power Industries (N25bn).
•AMCON has acquired N2.78 trillion face value of NPL from 21 banks to date

The Asset Management Corporation of Nigeria (AMCON), on Thursday in Lagos said it will conclude the purchase of non-performing loans (NPL)from the nation’s banking industry by October 31.

By that date, according to Mustafa Chike-Obi, AMCON’s Managing Director, the corporation “would have acquired N2.78 trillion face value of NPL from 21 banks at a cost of N1.16 trillion.

This would represent over 95 per cent of all outstanding NPLs in the banking industry.”

Addressing journalists in his office, the AMCON boss said some banks were compelled to sell some loans, including three valued at N275 billion and owed by Zenon Petroleum, Seawolf Oilfield Services Limited and Geometric Power Industries.

He insisted that the loans, though “largely performing,” were taken over because of “they could potentially pose a risk, so we compelled the banks to sell them.”

Chike-Obi put outstanding loans by Femi Otedola’s Zenon at N150 billion to about eight banks, including United Bank for Africa, Zenith and Access Bank, among others; Seawolf, an oil services outfit. is exposed to First Bank and has outstanding N100 billion; while Geometic Power, owes Diamond Bank N25 billion.

He added that the loan was purchased at between 85 and 95 per cent of face value

Insisting that the decision and choice of qualifying facilities, were devoid of political considerations, he stressed: “The banks did not want to give up the loans, but (were compelled) because they were systematically important, so we had to get them to give it up… AMCON insisted because the loans are too big for the banks… The borrowers don’t like this (the takeover, because) AMCON is more powerful.”

The choice of the loans, which were approved by the Central Bank of Nigeria (CBN), he continued, was arrived at from a pool of all the large loans in the system, the capital base of the banks involved and the concentration of such facilities, noting that the loans had to be performing to be considered.

Besides managing the Keystone Bank, Mainstreet and Enterprise Banks – nationalised on August 5, 2011, he said AMCON has purchased a total of 9,000 loans backed by significant shares in several public companies.

Having purchased the NPLs, recapitalised the banks, the next phase, he said, is to start managing the portfolio, including recovery, and where necessary – restructuring the loans over the next 10 years.

He assured: “We are going to use every tool available to us including litigation (in the process of loan recovery).”

Chike-Obi also hinted that discussions were on about looking at the possibility of compensating shareholders of the three nationalised banks, using the average of the other five rescued banks that were swallowed by rivals last month.

Such average, he said, would be set aside and used for the compensation, where such is allowed under the enabling legislation.

“The government is sympathetic to their plight. It is important to listen to people, but we were resolute and could not be blackmailed, but we would look at a way within the law,” he stressed.

The corporation, in the process of loan recovery, he assured would go after the personal assets of promoters of the defaulting companies, even when such a company is liquidated.

“They are advised to sit down with us to restructure the loans,” he added, hinting that, may have begun stigmatising companies and individuals whose loans have been bought by AMCON.

Going forward, Chike-Obi added, “very few banks will lend to anybody, unless AMCON gives you a clean bill of health, because (it) has superior powers (in terms of loan recovery and enforcement).

Citing a recent example, the AMCON boss recalled that “a company owed N12 billion (to the industry), and got a $300 million contract (but soon realised that) no bank would lend.”
The company owners were therefore forced to ensure the facility started performing.

The collaterals used for the various loans, he explained further, cut across interest in large corporations, housing, agriculture, manufacturing, oil and gas, among others, reminding all that AMCON is not an undertaker but a resolution vehicle.

“We would talk to people, try to support them,” and that the corporation is concerned about not fuelling further unemployment, in a country where the average employee supports 10 people.

He praised government, because there has been no unwarranted or undue interference in AMCON’s activities, noting with satisfaction that the corporation fulfilled its mandate successfully, making Nigeria’s reform efforts “the best of its kind anywhere in the world.”




Source: daily Independent

http://webcache.googleusercontent.com/search?q=cache:http://www.proshareng.com/news/15238

^^^Why should AMCON compel banks to give up 'largely performing' loans at a discount of between 85 to 95 percent? How is a loan of N150billion too large for eight well-capitalized banks?