By Omoh Gabriel, Business Editor
Indications emerged last week that the Asset Management Company set up by the CBN will after all take up shareholding in banks from which they purchased bad debt.
This has confirmed fears by some bank Managing Directors and shareholders that AMCON may become a smoke screen for those who want to buy into these banks. This twist is also contrary to the position held by the CBN in which it said government is not interested in nationalising the rescued banks.
Speaking to journalists in an interactive session in Lagos recently, the group Managing Director of Union Bank, Mrs Funke Oshibodu said that in the second phase of bad debt buy of AMCON, it will take the debt as shares depending on what is in the books of the banks.
This fact was confirmed by CBN Deputy Governor, Financial Sector Surveillance Mr.Kingsley Moghalu. Fielding questions from journalist at the signing of memorandum of understanding for the establishment of the Banking Sector Resolution Cost Sinking Fund in Lagos, he said “AMCON is also a recapitalisation vehicle and can help the banks recapitalise by injecting fresh fund into them in exchange for shares. It has not done this but it is one of the things it can do”.
Mrs Oshibodu said the first intervention of AMCON in which about N1.3 trillion of bad debt in banks were purchased is being reconciled with the various banks and that the banks and AMCON will ascertain how much more is required to reduce the erosion in the banks’ capital. She stated that after the reconciliation, whatever is needed to bring the rescued banks to zero capital position out of their current negative position will be offered to AMCON as shareholding.
According to her, all the bad debts that were offered by the rescued banks were absorbed by AMCON and Union Bank got N239 billion from AMCON while the non-intervened banks’ margin loans were taken off their books.
She disclosed that Union Bank in its recapitalisation drive has penciled down two core investors in which one has been selected as preferred while the other has been put in the reserve position. She said that discussions with the preferred bidder has reached advanced stage.
According to Mrs Oshibodu, the core investor will be revealed when the bank has entered into a memorandum of understanding with the institution. She said the recapitalisation of Union Bank will be between the core investor who will become the major shareholder, AMCON and the existing shareholders. She disclosed that the bank will undertake a right issue to complement existing shares of the bank in the recapitalisation process of the bank. She said the recapitalisation is likely to be completed by the 1st quarter of 2011.
AMCON on Tuesday said that it will issue additional N500 billion ($3.3 billion) in zero-coupon bonds to clear up remaining bad bank loans by March 31. Chief Executive, Mustapha Chike-Obi said AMCON had issued three-year zero-coupon bonds with a face value of N1.03 trillion to 21 banks in December in exchange for non-performing loans, paying out a discounted total of N770 billion.
He said margin loans accounted for about 40 per cent of the total non-performing loan purchased.”We are going to clear up everything by March 31 and at that point, we would have issued proper bonds, fully tradeable,” Chike-Obi said. “I think we will be spending around N500 billion more.”
AMCON said in December it would register to issue up to N3 trillion in tradeable bonds, although it expected to use only N2.4-2.6 trillion in the recapitalisation process.
It said the bad loans would initially be exchanged for “consideration bonds” which the banks would hold while it registers fully tradeable debt instruments. The consideration bonds will then be retired and exchanged for liquid bonds.
The “bad bank” was set up to help recapitalise lenders rescued in a $4 billion Central Bank bailout in 2009 and to restore lending in sub-Sahara Africa’s second-biggest economy. It aims to bring the nine rescued banks’ negative shareholders’ fund back to zero before new investors come in, and return them to minimum capital adequacy.
Part of the N500 billion additional bond issue will be used to soak up non-performing loans from banks other than those rescued in 2009. Among the nine rescued lenders, Union Bank received the highest amount for its bad loans, more than N239 billion, AMCON said.
Oceanic Bank said it also received around N200 billion from AMCON, while Intercontinental Bank said it received over N146 billion and expected additional bonds in a subsequent purchase. A spokesman for Wema Bank said the bank had received N15.2 billion from AMCON. A banking source said Bank PHB got N140 billion in exchange for over N300 billion worth of bad loans.