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AP battles Access Bank over $35m debt

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The management of African Petroleum Plc on Monday faulted the alleged plans by Access Bank to wind up the company over a $35m debt under the provisions of the Companies and Allied Matters Act..
The company’s Managing Director, Mr. Tunde Falasinnu, who spoke in Lagos said while it was true that the company was owing the bank, some aspects of the agreement, especially the exchange rate that governed the repayment had become contentious.
Access Bank, in court documents published in several newspapers on Monday, had claimed that AP was insolvent; hence it could not pay the $35m debt. The bank has therefore asked that the company be wound up.
However, Falasinnu said at a press briefing that AP has refused to pay the debt because the bank was requesting for the debt to be paid at a rate different from what was in force when the loan was taken.
He said that the debt arose from facility extended by the bank to finance the importation of petroleum products.
He explained that pursuant to financing of the fuel shipment, AP opened a Form M with at the Central Bank of Nigeria and a Letter of Credit was opened by the bank at the rate of N116 to the United States dollar.
He added that trouble started when Access Bank on December 2, 2008 sent a debit advice, saying the money should be paid at the rate of N127 to a dollar.
He said AP objected to the rate and petitioned the CBN, saying the company was willing to adhere to the final decision of the apex bank on the issue.
“We are still awaiting the decision of CBN on the matter before we saw the advertorial requesting the winding up of the company. The request sounds very ridiculous. We cannot just allow ourselves to be cheated because if we pay that amount, the bank is ripping us off to the tune of N440m in just one transaction,” he said.
The AP boss said that the company had never denied owing Access Bank, but considered the demand inappropriate since it will amount to round tripping to use the same documents to purchase foreign exchange from the CBN.”
He said that AP made this position known to the Access Bank via a letter dated June 3, 2009.
But Access Bank Plc, in response to AP statements, accused the oil firm of attempting to whip up sentiments against it and shift public attention from its inability to settle its long overdue indebtedness to the bank.
According to the bank, African Petroleum commenced a banking relationship with Access Bank in November 2007 and a formal offer of banking facility for the sum of $100m was made to them vide a letter dated 17th December, 2007, and was reviewed in May 2008 to $50m, and tenured for one year, both of which were accepted by the Management of AP.
Access Bank offer letters, which detailed the terms and dynamics of the facility including the fact that the “facility is subject to a possible exchange rate risk and this risk remains the primary obligation of the customer and that there is no obligation on the part of the bank to provide customer with funds (either in local or foreign currency) to repay any exposure from the utilisation of the facility” was duly accepted by African Petroleum.
It said that following this, African Petroleum via its letter dated June 24, 2008 instructed Access Bank to establish an Irrevocable Letter of Credit on its behalf for the sum of $38,937,000.00 in favor of Glencore for a tenor of 180 days using its $50m trade finance line.
It added that “on July, 25, 2008, an LC was opened on behalf AP in favor of Glencore, which was due for payment on November 30, 2008.
On November 12, 2008, 18 days before the payment date the Bank advised AP of the maturity of its facility and requested that it provides funding for the naira equivalent of the $35,153,822.15 to enable the bank purchase FX for the repayment of this obligation. Even though a further notification letter was forwarded to AP on November 24, 2008, the company refused/neglected to provide the naira funding as requested.”
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