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Arik Air owes Zenith, 3 other banks N165bn—AMCON

The leadership of the Asset management Corporation of Nigeria (AMCON) has provided more disturbing details on the financial rascality and major debt profile of the rescued airline, Arik Air.

The managing director of the institution, Kuru while explaining the rationale behind the action of AMCON before the Senate Committee on banking, insurance and other related financial institutions, saying what AMCON did remains the best option in that circumstance.

He disclosed that whereas it has bought Arik Air’s non-performing loans from Union Bank of Nigeria Plc valued at N71bn and Keystone Bank Limited also valued at N14bn with the transaction with the latter originated by the defunct Bank PHB.

He said, “The principal promoter of Arik Air is Sir Johnson Arumemi-Ikhide. Apart from AMCON, Arik is also currently indebted to other commercial institutions in Nigeria, including Standard Chartered Bank, Zenith Bank, Ecobank and Access Bank to the tune of circa N165bn; N26bn is owed to the federal aviation agencies and regulators; $11m is owed to European aviation agencies and service providers; and $20m owed to Lufthansa Technique.

“AMCON also acquired three other non-performing loans of companies in which the principal promoter is Sir Johnson Arumemi-Ikhide, namely: Rockson Engineering (N107bn), Ojemai Farms Limited (N8.6bn) and Ojemai Investment Limited (N1.9bn). The total exposure of Sir Arumemi-Ikhide to AMCON is N263.7bn.”

Kuru recalled that in far away September 2011, AMCON restructured Arik’s debt from N85bn to N70bn as a nine-year-term loan running at 12 per cent interest per annum and decried that “Unfortunately, the proprietor of the business failed to meet all the restructuring agreements’.

Part of the failed restructuring terms include that AMCON should appoint a resident monitoring manager who would have the authority to call for any of Arik’s records for examination. Arik was also to provide three-year records of its remittances to the Federal Airports Authority of Nigeria.

According to him, “Arik defaulted on the terms of the restructuring and failed to make the monthly repayment as agreed”.

“In May 2013, AMCON sourced N26bn of the Central Bank of Nigeria’s Power and Aviation Intervention Fund through the Bank of Industry on behalf of Arik. AMCON disbursed N21.38bn of the BoI loan to Arik as working capital. Out of this amount, N2.4bn was meant for the reconfiguration of two aircraft from passenger to cargo carriers. This was never done as the funds were diverted by the Arik management and is now the subject of EFCC investigation. Both aircraft were abandoned in the UK.”

AMCON also explained that there is still another debt restructuring proposed for Arik’s debt to reduce it from N138bn to N90bn in December 2015 which is still awaiting the CBN approval.

The failed proposal was made based on Arik’s plan to do a private placement and subsequently do an Initial Public Offering within a period of six months.

“Based on that, they were expecting N44bn from Afrexim as a bridge. None of this happened as Arik could not comply with any of the conditions given to them. In spite of the leniency and good faith demonstrated by AMCON throughout the negotiations, Arik refused or neglected to adhere to the terms of settlement.

“AMCON continued to bear the burden of repaying the BoI loan at one per cent interest rate without any corresponding commitment from Arik. So far, AMCON has paid N9.05bn on behalf of Arik.”

According to AMCON, the total recoveries from Arik to date at N4.6bn, which he said, was only 3.2 per cent of current exposure to AMCON. He stressed that the total repayment by Arik in last 18 months was “N50m only.”