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.”