March 31, 201 by Yemi Kolapo
The Asset Management Corporation of Nigeria has bought about N1tn non-performing loans of 22 rescued and non-rescued banks in the second phase of its rescue programme in the banking sector.
The Managing Director, AMCON, Mr. Mustafa Chike-Obi, disclosed this in an exclusive interview with our correspondent on Wednesday.
He added that the corporation had also put plans in place to issue N1.7tn bonds at its completion board meeting in Abuja on April 6, noting that there would be a road show for investors in the Federal Capital Territory on Thursday (today), and in Lagos on Friday.
He said, “We have bought non-performing loans of 22 banks, worth approximately N1tn at face value, for about N600bn. We are going to issue at this point, a shelf-registration of N3tn, but we are going to issue about N1.7tn bonds on April 6.
“The purpose is to replace the N1.1tn consideration bonds that were issued on December 31, 2010, and to buy the new N600bn NPLs in the second phase.”
Chike-Obi explained that the N3tn shelf registration would allow AMCON to issue more bonds when the need arose.
The corporation had bought about N2.2tn non-performing loans of banks (face value) for about N1tn in the first phase of its rescue programme.
The AMCON managing director had then told our correspondent, “The end process is that we take delivery of the non-performing loans, and the banks, instead of being stuck with illiquid non-performing assets, have bonds that they will cash as they make new loans, and use the proceeds to fund new loans.
“They can create new portfolio of loans in line with the CBN’s prudential guidelines. And as they make loans, they will be able to fund them.”
In the second phase, Standard Chartered Bank and Citi Bank did not sell non-performing loans to AMCON.
Experts have, however, described the resolution of the banks’ NPL crises, including the speedy issuance of bonds, as a remarkable achievement that might not have been possible without the cooperation of the Central Bank of Nigeria, Ministry of Finance, Debt Management Office and the Securities and Exchange Commission.
The banks that were rescued by the CBN in 2009 have reached advanced stages of negotiation with their respective investors in a bid to take their recapitalisation above zero level.
The PUNCH had exclusively reported that, following the almost concluded merger and acquisition deals between the rescued banks and core investors, a formula for establishing the percentage ownership of all the parties to the recapitalisation deals was awaiting written approval by the CBN and the Ministry of Finance.
Investigation by our correspondent had revealed that the ownership structure would be determined by weighing a bank’s total non-performing loans against the total amount it required to recapitalise to zero level.
According to findings, the formula will also give the existing shareholders of the rescued banks some value to fall back on unlike if the banks were to be liquidated.
“We have seen what the ownership formula looks like. I think everyone has a good deal, based on the level of negative capital of the banks and their non-performing loans,” a source, who spoke in confidence to our correspondent because of the delicate nature of the matter, had said.
Our correspondent reliably gathered that, for existing shareholders, their percentage ownership would be determined by dividing the value of a bank’s non-performing loans by the total amount required to recapitalise it to zero level.
The percentage ownership of AMCON in all the cases, it was learnt, would also be arrived at by dividing the value of recapitalisation (difference between NPL value and total requirement) by the total capital requirement.
A source close to the Oceanic Bank International Plc’s recapitalisation deal had also disclosed to our correspondent that, on the basis of the ownership formula, the new investors might own 80 per cent of the bank, while AMCON and the existing shareholders might end up with 10 per cent each.