Tag: AMCON

Despite its enormous powers under its enabling laws, the Asset Management Corporation of Nigeria (AMCON), is struggling to discharge its mandate of debt recovery. There is an outstanding debt of over N3 trillion that it has not been enable to recover in its eight years of existence. With a short lifespan for its operation, there are years that it may not recover this huge debt before it winds up in 2021. COLLINS NWEZE reports.

With an outstanding debt of over N3 trillion,  the Asset Management Corporation of Nigeria (AMCON) still has a long way to go before it winds up.

This explains why the corporation gathered legal practitioners in Lagos to discuss ways of getting the recovering the funds from recalcitrant debtors. The 2018 yearly seminar for “AMCON external solicitors and asset management partners” provided opportunity for the lawyers to discuss the AMCON debt recovery drive and ways to improve it.

Moreover, the 2009 banking crisis was triggered largely by the poor quality of bank assets because then, many banks suffered from an overhang of “non-performing loans”, otherwise described as “toxic assets” or “troubled assets”.

To contain the crisis the Asset Management Corporation of Nigeria (“AMCON or Corporation”) was establishment as a bank resolution vehicle through the AMCON Act.

AMCON has powers, which at face value, empowers it to deal with defaulting debtors. The utilisation of these powers, in theory, should have helped AMCON in recovering to huge debt

Section 48 of the AMCON Act empowers AMCON to either act as, or appoint a receiver for a debtor-company whose assets have been charged, mortgaged or pledged as security to AMCON. This in itself is a unique provision. First, AMCON itself may act as receiver, which is a departure from the provisions under the Companies and Allied Matters Act, thereby enabling it to throw its resources (manpower and otherwise), to ensure quick recovery of debts.

One of the speakers, Ibrahim Buba of Federal High Court, Lagos said AMCON was created to be a key stabilising and revitalising tool aimed at reviving the financial system.”

He said the AMCON Act 2010 (as amended)  was gazetted on August 9, 2010, adding that the corporation explores litigation as one of the options to recover non-performing bank loans.

He said: “In banking sector disputes, the courts can be faced with serious fundamental issues and indeed urgent ones, that hit at the bottom of the economy of the nations, that must be handled with dispatch, as failure to do so will tell on the economy, and the judiciary as an institution set up by the Constitution to adjudicate on disputes between persons, authorities and governments, in order to have order, peace and good governance, a veritable tool of maintaining social equilibrium. Indeed no nation can afford to toy with its banks and finances, if it must advance in the comity of nations. Consequently, every regime must and shall act to meet its immediate and future problem.”

Federal High Court Judge, Justice Nnamdi Dimgba said the issue of AMCON’s debt recovery drive has become complex. It touches on the thoughts and deliberations of policy makers; AMCON executives; and even the average citizen (as AMCON oversees funds that trace their roots to the taxpayer). For those of us in the judiciary we are partners in ensuring that AMCON successfully meets the mandate conferred upon it by the AMCON Act – which we are called upon to interpret, from time to time.

He said the task to strengthen AMCON’s recovery drive is of national concern.

“Figures bandied in the media suggest that AMCON’s attempts to recover value from non-performing loans (NPLs) stands at a paltry 19 to 20 per cent or thereabouts of the NPLs on AMCON’s docket.  It has been suggested that in over eight years, AMCON has only been able to hit an annual recovery rate of less than 2.5 per cent. The unrecovered value currently stands at around N3 trillion”.

In context, this exceeds the internally generated revenue (IGR) of the 36 states. In the light of growing agitations for salary increases, investments in tertiary education, and improved healthcare – these are alarming figures that requires AMCON to fully utilize its statutory powers, in order to deliver its mandate under the AMCON Act.

Dimgba said the question however, is whether the powers contained in the AMCON Act are suitable, or whether the powers are being underutilised. This quickly becomes the boundary that determines whether AMCON is pursuing its mandate vigorously, or is inadvertently giving a free pass to derelict debtors.

The examination of the Special Powers of AMCON under the AMCON Act showed that the receiver appointed by AMCON (or AMCON itself) has the power to: realise the assets of the debtor company; enforce the individual liability of the shareholders and directors of the debtor company; and manage the affairs of the debtor company.

He said the powers under the AMCON Act are unique. “Ordinarily a creditor is only able to exercise receivership powers over assets charged to it directly or where an all-assets-debenture exists. The AMCON Act however, in a bid to ensure that the best value is derived from the undertakings of the debtor, empowers AMCON to exercise its rights under Section 48 over the entire undertakings of the debtor company and assets, notwithstanding that only a part of the assets of the company was charged or mortgaged as security to AMCON,” he said.

“The provisions are further strengthened when dealing with a situation where AMCON or a receiver appointed by it, opts to manage the affairs of the debtor company. In such an instance, the enforcement of all judgements, claims, debt enforcement procedures existing or being pursued before the publication of the notice of the receiver to manage the affairs of the debtor company stands suspended and unenforceable against the debtor company and corporation’s receiver for a period of the shorter of one (1) year from the notice or the period that the receiver continues to manage the affairs of the obligor Company”.

“There are concerns as to whether the provisions on receiver management as contained in the AMCON Act are actually fit for purpose or whether they introduce business rescue legislation into Nigeria by the back door. In the event that they do in fact introduce a form of business rescue, it is evident that this may be a clog in the wheel of AMCON’s recovery drive. Further analysis on this point is provided in paragraph 39 below”.

In addition to receivership, AMCON is also empowered under Section 49 of the AMCON Act to, through an application ex-parte,  seek a forfeiture order against the assets of a debtor. This is a particularly important power as it enables AMCON to move stealthily without tipping off otherwise crafty debtors. The forfeiture order vests the control and possession of the assets in AMCON, pending trial and judgement. Upon a favourable judgment, the assets in question are permanently forfeited to AMCON.

“What is clear is that these powers serve as a form of security for AMCON in litigating appropriate cases, comforted by the fact that at the end of trial, the fruits, in the form of the forfeited assets would flow to AMCON. This is clearly a better position than a situation where AMCON successfully prosecutes a case in court but is left to subsequently undertake the ordeal of enforcement post – judgment with the risk that the assets in question may be dissipated by the time of enforcement.”

He said in addition to the benefits set out in the preceding paragraph, it is further evident that the utilisation of forfeiture orders would serve as a bait to recalcitrant debtors, forcing them to the negotiating table to agree to a settlement or resolution of their debts, especially where these debtors have the funds to settle their debts, but are merely truant.

“The foregoing said, AMCON is required to move quickly, as , where AMCON fails to commence debt recovery actions within 14 days of obtaining a forfeiture order, the order lapses,” the Judge said.

Also, there is a perception that many debtors have the resources to pony, but for reasons best known to them, are not ready to do so. To address this issue, AMCON, is by virtue of Section 50 of the Act, empowered to apply, ex parte, to court for: (x) attachment and (y) freezing of bank accounts of a debtor where there is reasonable belief that sufficient funds to offset their debt to AMCON are contained in that account.

“There is however a need to balance the rights of AMCON with the rights of the debtor in question. For this reason, AMCON is required to immediately commence a debt recovery action against the debtor or debtor company. The balance is achieved in that, where AMCON fails to commence the required debt recovery action within 14 days, then the order shall lapse. As such, this power is directly linked to the success of a debt recovery action.

The AMCON Act, per Section 51, also provides for a specialised bankruptcy regime. In sum, where AMCON obtains judgement in an action for debt recovery, AMCON is empowered to begin bankruptcy proceedings against a judgement debtor, even without establishing the occurrence of any act of bankruptcy or fulfilling other conditions prescribed under the Bankruptcy Act. In simple terms, this provision achieves the same results that would result from bankruptcy proceedings, albeit in a shorter time and without the extensive pre-conditions.

Once an obligor is adjudged bankrupt, an official receiver may be appointed or AMCON may assume the office of trustee of the property of the debtor. In sum, this provides another avenue for AMCON to recover debts, upon a successful debt recovery action.

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By virtue of Section 52 of the Act, AMCON is also empowered to approach the courts to issue a winding up order against a corporate debtor that is also a judgement debtor pursuant to a debt recovery action that has failed to pay its judgement debt within 90 days from the judgement/order for payment.

Compared to creditors’ winding up under the CAMA, the provisions under the AMCON Act are simpler. For example, under the AMCON Act: there is no requirement to notify the judgement debtor; winding up is started by way of an application (and not a petition as is the case under CAMA); and there is no obligation on AMCON to apply to court for leave to advertise or not  to advertise the application; there is also no room under the AMCON Act for creditors’ participation.

Be that as it may, where a winding up order is made, the provisions of CAMA as it relates to priorities of payments would be triggered and would be as applicable as though the winding up order was obtained under CAMA.

According to Dimgba, the facts however suggest that this stronger recovery drive is not yet reality, as the docket of unresolved NPLs remains dangerously high. The corresponding question begging for answer is: why have the special powers contained under the AMCON Act not translated to an increased recovery drive?

An analysis of similar recovery agencies across the world suggests that there are two key distinguishing approaches to the job of an asset management corporation.. On one hand, is an approach which favours enforcement through the courts and the other is the restructuring of the NPLs.

The enforcement approach is informed by the understanding that the asset management corporation in question has a limited time, and a recovery mandate. The approach further understands that the vast majority of debtors may be unable or unwilling to repay their debts. With this understanding, the enforcement approach jettisons restructuring plans and focuses on enforcing the security by sale of the underlying assets.

The restructuring approach is however informed by the understanding that time is abundant and opportunities exist for debtors to restructure their NPLs and provide a plan ‘usually long term’ toward resolving their indebtedness.

 

 

 

 

Recovering the nearly N5.4 trillion bad loans it bought from commercial banks has not been easy for the Asset Management Corporation of Nigeria (AMCON), which is seeking more constitutional powers to deal with recalcitrant debtors, many of who have gone into hiding. COLLINS NWEZE captures the rising challenges before AMCON ahead of its 2023/24 wind up date.

Determined to recover the N5.4 trillion bad debts it bought from commercial banks, the Asset Management Corporation of Nigeria (AMCON) is seizing valuable assets belonging to prominent Nigerians, who constitute its major debtors. The onslaught was launched about two months ago.

The corporation is sitting on substantial assets, the status of way must be determined on or before its sunset, which is around 2023/24.

AMCON got the nod of a Federal High Court sitting in May to realise its objective. One of such was an injunction against Sea Petroleum Oil & Gas Limited, whose chief promoter is former Minister of Aviation, Princess Stella Oduah.

Princess Odua, a serving senator, has been having a running battle with AMCON over her inability to settle her huge debt of nearly N20 billion.

Last week, the corporation also secured a Federal High Court Abuja Division order to take over Sigma Apartments owned by Sigma Engineering & Construction Limited over N1 billion debt.

Asset tracers are finding it difficult to smoke out more than 5,000 debtors on AMCON’s list from hiding. Besides, buyers are not showing interest in many of the seized assets.

Recently, the corporation openly expressed worry over its inability to sell N182 billion assets it obtained from debt resolution at competitive market price.

AMCON Managing Director/Chief Executive Officer Ahmed Kuru said the corporation’s current Assets Under management (AUM), that is assets obtained from debt resolution, has a book value of N182 billion, which it is unable to sell.

Kuru who spoke in Lagos at a two-day retreat on AMCON Act Amendment Bill said: “Our ability to successfully divest these assets, at competitive market price, is severely hampered by several factors including valuation methodology, unperfected title documents, state of the economy, purchasing power”.

“The third challenge is the uncooperative attitudes of select obligors who are either unwilling and/or unable to settle their indebtedness. Such debtors prefer to resort to all manner of diversionary tactics as opposed to dealing with the problem of their indebtedness. It sees most of them are buying time, to where we do not know”.

At the retreat were members of the Senate Committee on Banking, Insurance and other Financial Institutions.

According to the AMCON boss, the N4.8 trillion bad loans owed to the corporation represents 55 per cent of the 2018 budget.

He expressed doubt on the Federal Government ability to expense AMCON’s debt in the short-term.

Kuru reminded the Senate Committee on Banking, Insurance and other Financial Institutions that the ramifications for failure by AMCON to recover its debt go beyond economic cost.

His words: “It was for that reason, AMCON, after seven years of negotiating with the obligors with no commensurate recovery result, has decided to change its strategy, which now pays strict attention to enforcements as a way of compelling especially the recalcitrant obligors to come and pay up their debts.”

To achieve this however, Kuru said the corporation will be heavily dependent on the legislature, most especially members of the committee to facilitate the amendment of the AMCON Act, since most of the political exposed business heavyweight obligors now employ different antics in law to tie the corporation up in courts.

Highlighting the corporation’s other challenges, the AMCON CEO said: “One of the major areas for amendment is the matter of vesting proprietary interest of all collateral assets acquired by AMCON from commercial banks. The proposed amendment will have retrospective effect. The vesting of proprietary interest of all collateral assets in the resolution vehicle was implemented in Malaysia and was instrumental to their success in recovering debt obligations”.

Chairman of the Senate Committee Rafiu Adebayo Ibrahim said that Nigeria can be made great again, if the legislature, as a matter of urgency, empowers AMCON to go after recalcitrant obligors.

Senator Ibrahim said that legislative backing remained the only way for AMCON to implement the tough mandate given to the corporation when it was set up in 2010.

The senator hinted that the upper chamber has, as part of its oversight function, decided that AMCON must be given all the necessary support to perform as expected at this critical time in its lifespan.

He said AMCON has over the past seven years, done its best to resolve these debts but still encountering resistance from obligors.

The senator, however, urged the AMCON leadership to collaborate with the ministry of Finance, the Central Bank of Nigeria (CBN) and the office of the Attorney- General of the Federation to propose that the President issues an Executive Order on seizure of assets of persons indebted to AMCON.

In a keynote address he delivered at the retreat, Ibrahim restated the Red chamber’s plan for serious discussions as soon as possible with major stakeholders, including the CBN, the FMF, the Nigerian Deposit Insurance Corporation (NDIC) and relevant committees from the legislature among others, where issues hindering AMCON from performing optimally would be discussed. He listed among others, funding model of AMCON as an issue that could enable the recovery agency to finish its assignment on a high.

According to him, the Senate will at this stage bare its fangs by amending the AMCON Act because the corporation has been a key stabilising and re-vitalising tool in the local financial system.

He said the legislature therefore supports the proposed plan by AMCON to publish the list of especially the 350 obligors that accounts for nearly 80 per cent of the AMCON’s huge debt.

 

The takeover

 

AMCON purchased the Eligible Bank Assets (EBAs) of Sea Petroleum & Gas Limited from Union Bank Plc sometime in 2012. But, despite the overtures and genuine efforts made by AMCON to reach an amicable settlement, the Senator Oduah and her co-promoters have remained recalcitrant.

Having exhausted all avenues of peaceful resolution of the humongous debt, AMCON was forced to seek judicial redress. The court order also affects Princess Stella Oduah’s other business interests for which AMCON has since appointed Moyosore Jubril Onigbanjo, a  Senior Advocate of Nigeria (SAN) as a Receiver over Sea Petroleum Oil & Gas Limited; Sea Petroleum and Gas FZE as well as Star Tourism and Hotels Limited, all Princess Oduah’s assets.

The court also ordered the freezing of the funds of Sea Petroleum & Gas Limited and its affiliated companies and principal promoters held anywhere by any entity or persons in Nigeria; authorised AMCON and its Receiver to take over all assets pledged as collateral for the facility by Sea Petroleum Oil & Gas Limited.

Besides, the order on Sigma Apartments was given by Hon. Justice B.F.M. Nyako said the apartment is promoted by Saidu Samaila Balarabe Sambawa, a former minister of Sports & Social Development.

The order came on the application of AMCON after the corporation exhausted all avenues of peaceful resolution with the obligor regarding the huge debt, but was left with no other choice.

According to AMCON, information on the website Sigma Apartments described the apartment as “an epitome of refined living, featuring 48 fully furnished service luxury apartments designed for those accustomed to the finer things in life.

“The apartment is conveniently located in the heart of Abuja metropolis midway between the northern and southern retail hub of the vibrant Abuja, downtown of Wuse ll. The site further describes it as a hospitality brand that provides extended stay accommodation for sojourners in Abuja.”

Sigma Apartments promoter and his directors have had running battles with AMCON over their inability to settle N1 billion debt. But, despite the overtures and genuine efforts made by AMCON to reach an amicable settlement terms, the businessman and his co-promoters have remained recalcitrant, thus pushing AMCON to seek legal solution to the issue.

 

Other debtors on the run

 

According to Kuru, the hiding debtors will surely be found. He said the corporation has engaged lawyers and asset tracers to go after them, adding that hiding does not solve the debtors’ problems nor absolve them of their obligations. He however said the corporation has so far recovered N740 billion at the close of the 2017 financial year.

AMCON had acquired 12,537 non-performing loans worth N1.7 trillion from 22 financial institutions, following the 2009 banking crisis.

Kuru said: “Some of them have decided to change their addresses, and there was even an instance where someone’s house, was number 19, he legally removed it to plot 2015. If we looked for him, we will not find him, because he has changed his address.

“But, we are looking, and hiding will not help. To borrow money is not criminal. We must borrow money from banks. But, what we do thereafter will make it criminal. If you want to hide under national hero, there is a problem.

“It is an obligation, and most loans are taken from depositors’ money. It is simple logic, if you do not pay, banks needs to collect their money for them to pay depositors. So, we must meet our obligations.”

The AMCON boss also spoke on debts allegedly owed the corporation by the promoter of The Hardley Apartments and former captain of the Nigeria Super Eagles, Nwankwo Kanu.

AMCON had in 2015, obtained an order from the Federal High Court, which gave the corporation permission to take possession of The Hardley Apartments located at No. 46 Waziri Ibrahim Crescent, Off Elsie Femi – Pearse Crescent, Off Adeola Odeku Street, Victoria Island, in Lagos State. This order still subsists, pending the determination of the substantive matter.

When asked if Kanu’s debt will be forgiven based on his status as a “national hero”, Kuru said: “Part of the obligation to be a national hero is to meet obligation. You must be able to meet your obligation. A hero must be able to meet his obligations. You took a commercial loan to set up a hotel. What he told us was that somebody cheated him. He had one partner that was supposed to be remitting money and was not remitting money. How does that concern us?  Let him take that person to court”.

“I think part of the integrity test is for somebody’s ability  to honour his obligation voluntarily without going through court process. If you want some concessions and some considerations, I think that is another issue entirely. But you cannot on the basis of being a national hero not meet your debt obligation because I have not heard of any ‘National Heroes’ Fund.”

Kuru said the corporation will by next month be releasing the names of debtors to the press, and the obligations standing against their names.

His words: “But, we decided last week that we will give them a last chance, and take this as a final notice. You have N10 billion obligation, and you want to be a senator. Fine, you may not have N10 billion to pay me.

“But, let us sit down and have an understanding. I will pay you in two years, or I will pay you in five years. There is no body to give N2 billion or N30 billion today.  But, sit down with us and explain how you want to pay. They are just looking the other way and want to take responsibility as leaders. I do not think it is fair”.

Kuru said that by 2023, AMCON should have ceased to operate after the expiration of its 10-year mandate.

He said: “Frankly speaking, personally, I feel that by 2023, regardless of whatever is the situation, AMCON should wind down because if after operating for 10 years, in addition to two to five years when the facilities were in the commercial banks, you did not do anything, then there is nothing you can do by 2020.

“So, at that stage, I believe that what we should be able to do, if we have any outstanding collaterals that were not realized, I think, we have enough facilities in CBN and NDIC to take care of that.”

 

Legal backing will

enhance performance

 

According to Kuru, the corporation needs legal support as its debtors are getting bolder by the day and employing all kinds of tricks to tie the corporation up in court.

Kuru, who spoke at the opening of a three-day retreat in Kano, said obligors are smarter, desperate, more aggressive and recalcitrant.

“This”, he says, “calls for a need to revisit the AMCON Act which governs its operations.”

Kuru said that AMCON has over 3,000 cases and counting in different courts across the country.

He described as unbelievable that obligors, despite having the means to pay their loans have refused to pay what they owe AMCON and chose to do business with other names.

Kuru added that AMCON, having achieved remarkable milestones in the last seven and half years of its creation, has a determination to deliver even more if given the needed support from all key stakeholders, such as the legislature, the judiciary, the executive among others.

Presenting an abridged highlight of the corporation’s achievements in the last seven and half years, Kuru said: “AMCON has fully redeemed all Federal Government guaranteed bonds issued to the commercial banks for purchase of non-performing loans.

“The face value of the bonds was N3.7 trillion; the banks became stable and were able to support businesses; AMCON has successfully divested from the three bridge banks – Mainstreet, Enterprise and, Keystone banks; AMCON has recorded total recoveries worth N975 billion of which cash and assets account for 60 per cent and 40 per cent, respectively.

“Our second challenge has to do with the disposal of assets due to the economic downturn. AMCON’s current Assets Under Management (AUM), that is assets obtained from debt resolution, has a book value of N182 billion, which we are unable to sell.

“Our ability to successfully divest these assets, at competitive market price, is severely hampered by several factors including valuation methodology, unperfected title documents; state of the economy and, purchasing power among others.

“Our third challenge is the uncooperative attitudes of select obligors who are either unwilling and/or unable to settle their indebtedness.

“Such debtors prefer to resort to all manner of diversionary tactics as opposed to dealing with the problem of their indebtedness. It sees most of them are buying time, to where we do not know!”

Chairman of the House of Representatives Committee on Banking & Currency, Jones Chukwudi Onyereri, stated that the legislators will work with the Senate for a quick passage of the AMCON Amendment Bill. The Bill will ensure that the corporation gets all needed support from the National Assembly to meet its mandate.

Onyereri said that given the sunset date of AMCON, which he stated was created by the government not to operate in perpetuity, the National Assembly, the executive and the judiciary must ensure that the recovery agency of government meets its obligation within the expected and acceptable timeframe. He said,

“Earlier this year, we had a public hearing and a technical session on the AMCON amendment Bill. The Report on the Bill is out and will soon be presented before the House.

“This shows our commitment in ensuring that AMCON gets all the support it can get from the National Assembly in carrying out its mandate.

“This Bill is very important and we promise to work with the Senate in ensuring a quick passage of the Bill. As we are all aware, AMCON was not created to exist in perpetuity. There is a sunset date for AMCON and it is expected to have achieved its mandate before the sunset date.

“Therefore, and more importantly, we are here to interact with AMCON to see how we can further help in making sure that AMCON achieves this mandate for the common good of the country.”