published 16-03-2011; 10.08 am

BANKS GRUMBLE OVER AMCON OFFERS

CENTRAL BANK GOVERNOR LAMIDO SANUSI

Since the Asset Management Company of Nigeria was set up three months ago, it has set about its business with vigour. The AMCON was set up to buy and manage the non-performing assets of banks, especially the distressed banks taken over by the Central Bank of Nigeria three years ago. According to Mustafa Chike-Obi, AMCON’s managing director, the corporation, which is fully owned by the federal government, is also buying bad debts from 12 banks, which were not taken over by the CBN.

The AMCON deal with rescued banks is not going off without grumbles. There are indications that some of the rescued banks are not satisfied with the valuations placed on some of their bad loans. One such bank is Intercontinental where managers are querying an AMCON offer to buy the about N13 billion debt of oil importer Rahamaniyya Oil. The company, owned by Alhaji Rahaman Musa, who was once a close confidante and of late President Umaru Musa Yar’Adua. The AMCON proposal is to take over the debt for a little overfive per cent of its value. The offered sum, according to a source close to the former owners of the bank was N748 million. The bank rejected the offer and the discussions have been going to and fro. One bank source claimed that already the Rahamaniyya facility has been renegotiated and the bank is getting about N3 million receipts from the oil company monthly, with a promise of improvement.

Rahamaniyya ran into troubled waters when the financial crises of 2008 forced banks to cancel its facility, which were based on massive oil import contracts from government agencies. Debtors, including government agencies, also owe the company, like most debt-ridden companies trapped in the bank failures, heavily.

Many banks fear that AMCON is undervaluing their assets and they risk a serious undervaluation of their balance sheet as a result, but their challenge is to convince CBN inspectors that the loans are performing. The AMCON has a valuation platform, which grades debts in the order of debt with securities such as shares, and others without securities. The corporation insists that its valuation is fair. Indeed many of the heavy debtors used assets that were over-leveraged, such that there isn’t cover for the facilities. The corporation signed a Loan Purchase and Limited Servicing Agreement with 21 banks, issuing bonds of N1.3 trillion out of an estimated N1.8 trillion for their non-performing loans.