So, selling is difficult because the economy is challenged. The time of recession is not the right time to sell because when you sell, you may not get the value of your assets,” he disclosed.
The AMCON said it has plans to sell its majority stake in Peugeot Automobile Nigeria (PAN) Limited, a local joint venture with the major French automaker. Bids are being invited from investors.
Peugeot Citroen is the technical partner to the Nigerian assembly plant, which has capacity to assemble 240 cars a day, PAN said on its website.
The AMCON said it owned 79.3 per cent of PAN Nigeria Limited, having acquired the stake five years ago after purchasing the company’s debt and taking some as equity. PAN Nigeria Limited was set up in 1972 as a joint venture between the Federal Government and France’s Peugeot, with an annual production of 90,000 cars by the 1980s.
But operations nosedived and the company accumulated bad loans shortly after the government sold its stake via a privatisation to core indgenous investors in 2006.
On Multi-Trex, Nwauzor said: “If you go to Multi-Trex today, you will weep because of the bad management of the company. The place was mismanged. A Nigerian takes a loan and the first thing he does is to buy big cars. The cash for the cars is supposed to come from your profit and not taken out from the borrowed funds. Also, in the banking industry, insider loan dealing is a big problem because branch managers sometimes get five per cent of the loans. A lot of the loans went bad from day one because of insider dealings”.
According to him, the corporation took over some of the companies as dead entities, hence the need to shop for strategic investors with long-term interest.
He said: “AMCON did not go to Multi-Trex and say they wanted to take over. It was the loan the company borroed from a bank that AMCON bought. Now, we are trying to get the right investors and right management to run the place. No matter how much investment you make, if you do not have the right people to run the businesses, you will end up not making progress.”
Nwauzor confirmed Tinapa Resort as the investment of Cross River State under the administration of former Governor Donald Duke, noting that Governor Ben Ayade has shown interest to ensure that the business run successfully.
His words: “The idea was to recreate a mini Dubai in that place. We also want to see how we can attract the right investors. Some of the assets there are at the level of investment that you keep maintaining so that when an investor comes, he will not meet rotten assets. That is why Nigerians should appreciate what AMCON is doing.
“We appoint receiver-managers to oversee any asset that we take over. We make sure it is working. There are machines you need to grease everyday. So, the assets you want to sell must be in good order. We must provide police security, and keep the companies working. If you notice, at the middle of last year, we appointed Asset Management Partners to go after loans of N100 million and below. They are working tremendously. We then face the big ticket assets to tidy up before our time is up.”
The oil and gas industry, he said, is facing huge challenges. “The two oil rigs with us are not producing but we have to maintain them. But the cost of maintaining the rigs is heavy and if you do not maintain the rigs, they will go bad. The money are with Nigerians still doing businesses in other names but have refused to pay,” he said.
He said that last year, the Federal Government set up inter-agency committee on AMCON to help debt recovery. The idea was to round the debtors up and ensure they do not escape. The idea is to zero in on recalcitrant debtors.
“For SilverBird Group, the receiver manager is there and managing the place. AMCON does not want to kill any business. If you take over SilverBird Group and shut it down, the unemployment level will rise. If we revive the companies, millions of jobs will be created. You cannot sell Aero Contractors and make that money, but if you run it for five years or more, you will make your money,” he stated.
The Chairman of Senate Committee on Banking, Insurance and other Financial Institutions, Senator Rafiu Ibrahim, said that plans are underway in the Senate to strengthen AMCON’s debt recovery capacity.
Speaking on the theme: “Economic Rebuilding through Eligible Assets Recovery”, the committee cahir that time would soon run out on bad debtors to AMCON.
Ibrahim praised the new debt recovery drive by the corporation, adding that the legislators remain committed to help in the stabilisation of the economy.
He, however, noted that his committee must collaborated with key government agencies like AMCON, which carries a huge burden on behalf of the Federal Government to achieve the set objective.
Ibrahim said the Senate will no longer fold its arm and watch the economy destroyed by a few individuals indebted to the corporation to the tune of billions of naira.
“We can all attest to the renewed drive towards a more focused and enhanced assets recovery and the management approach under the new dispensation as evidenced by AMCON’s strides in recovering eligible assets from debtors. This underscores the corporation’s importance in the nation’s economic rebuilding effort. AMCON, since its establishment, has been a key stabilising and revitalising force in the Nigerian financial system and requires vital support from the legislature to achieve its statutory objectives,” he said.
AMCON’s leadership
After Kuru’s appointment as AMCON chief on August, 2015, succeeding Mustapha Chike-Obi as its pioneer Chief Executive Officer (CEO), he promised transparency in the sale of acquired assets and insisted on organising conducting open and competitive bidding processes.
“If you recall, what used to happen in AMCON was private disposal of assets. We have changed the whole policy. There is no longer private disposal of assets in AMCON. So, there will be no hanky-panky or secret deals in the disposal of our assets,” he promised.
Currently, a lot of specialised assets are waiting to be disposed, but disposing them at the prices they were bought is already a big challenge for the corporation. But many times, the assets could be re-valued based on discretion.
With the price of crude oil falling below $60 per barrel, AMCON’s ability to meet its debt obligations has also worsened. The drop in oil prices has reduced government’s ability to honour even its own commitment to some of the AMCON’s papers or bond holders. Secondly, because of the low prices of crude oil has affected turnaround in the economy, the economic activity of some of the businesses indebted to AMCON has been been weakened and its ability to repay challenged.
Besides, the impairment of assets is also affecting the prices of the assets that the corporation is holding. If we have an oil tank farm that was worth $50.1 billion a year ago, and one wants to buy it today, obviously it reflects the price of crude today.
Before AMCON was created, NPLs (Non-Performing Loans) rates were over 35 per cent, but today, they have fallen below 13 per cent after the corporation bought over 13,000 bad debts from banks. The poor NPLs rates were caused by insider-loan abuses and poor structured loans, among other factors.
The corporation has not only stopped further purchase of bad loans. It is trying to change its strategy from proving financial stability to recovering bad loans and consolidating its financial obligations.
Kuru believes that AMCON’s primary responsibility is not to take over businesses of debtors, but to support them.
He said: “If you see AMCON taking over any business, that means there is a problem with that business. Quite a lot of companies are operating but operating at a loss and you cannot continue to operate at a loss when you have obligations and cannot meet the such obligations then we will be forced to act.”
Kuru has urged strategic investors with long term interest in the economy that the right time to invest in the country is now, despite the slight challenges.
Kuru said: “AMCON is inundated with proposals from different investors with differs interests in the economy. Nigeria remains a growing and promising economy as far as investment opportunities are concerned but, it has to be for businesses and business owners that have long-term interest in Nigeria.
“Any investor without these characteristics may be overwhelmed as a result of the present situation of the economy, which is temporary to say the least. So, as far as I am concerned, the present economic challenge is actually the right time to invest in Nigeria; a time to lay a solid foundation and then grow with the economy in no distant time.”
According to him, AMCON will continue to sustain its tempo of recoveries, which began last year by strategically focusing on value enhanced exits of its portfolios, which encompasses continued negotiations and resolution of loans through cash recoveries, asset forfeitures through negotiation or enforcement; capital restructuring for short to mid-term exits as well as joint venture arrangements for asset operations and land development.
He assured that AMCON will also explore the creation of a robust Real Estate Investment Trust Scheme (REITS) to provide a market-driven exit for AMCON’s real estate assets as well as additional capital market instruments for institutional investors such as the Pension Fund Administrators (PFAs) and other interested parties. With these opportunities, Kuru said AMCON has a bouquet of attractive assets for different investors – locally and internationally.
Speaking at a three-day retreat organised by the Senate Committee on Banking, Insurance and other Financial Institutions in Uyo, Akwa Ibom State, Kuru said the corporation needs the support and partnership of the Senate given the high level of frustration it was getting from the debtors.
He said: “After more than six years of operation, all efforts to recover the loans diligently have failed. We now have to resort to the Act setting up AMCON by resorting to the courts. Let me be quick to add here that AMCON is not trying to unduly prejudice the views or positions of stakeholders, especially the judiciary,” he stated.
“AMCON remains a law abiding organisation with respect for the rule of law. However, our campaign is intended to draw attention to the enormity of the challenges and potential threats, which the bad loans in our portfolio pose to the wider economy and the common man. We are mindful of time as AMCON has a very short lifespan. Our sunset date of 2023 is drawing nearer each day. In fact, other similar institutions around the world, like Malaysia have wound up their recovery vehicles. They are now focused on managing or turning around the assets taken over during the recovery phase”.
By 2023, AMCON will cease to exist in line with the 10-year mandate given to it by the Act establishing it. However, the challenge is who will inherit the corporation’s unresolved assets if the corporation failed to achieve its mandate of resuscitating ailing businesses? These and many more are puzzles that only time will solve.
