The continuous disagreement between Asset Management Corporation of Nigeria and the shareholders of Arik Air, since the takeover of the Airline six years ago, is affecting investment in Nigeria, writes Chinedu Eze
Nigerians are worried about the endless feud between the shareholders of Arik Air and Asset Management Corporation of Nigeria (AMCOM), as the situation is already affecting investment flow in Nigeria.
For many Nigerians, Arik Air was an airline of pride that came many years after the Nigeria Airways Limited (NAL) descended from its apogee and became defunct.
In international aviation fora before 2017, Arik Air was the airline of discussion when issues concerning flight operations in West Africa were raised. It was a very prosperous carrier that aroused a lot of hope both in Nigeria and at international circles. However, on February 9, 2017 the progress was halted when it was taken over by AMCON in receivership.
In many of the allegations heaped on the founder of Arik Air Limited, Sir Arumemi Johnson by AMCON, one thing stands clear that the company owed it N240 billion. However, the actual amount has been stirred in controversy because it is lower than the amount the agency stated when it took over the airline, but higher than the amount AMCON deposed in court. This means that the debt has been oscillating without any indication that any of it has been paid.
Debts
In many of the recent diatribe against Arik Air founder and also in press statements, AMCON has insisted that the airline owed it N240 million. A day after AMCON took over Arik Air on February 9, 2017 the amount the government agency claimed Arik Air owed it was over N300 billion. A section of the media that published the story quoted the figures from the conference the organisation held to confirm that it had taken over the management of the airline.
In a publication on February 10, 2017, the Punch Newspapers reported the story of the takeover with the headline, ‘N300bn debt: AMCON takes over Arik Air as EFCC, grills Arumemi-Ikhide’. The newspaper reported, “The Federal Government, through the Asset Management Corporation of Nigeria, on Thursday took over the operations of the nation’s biggest carrier, Arik Air, and appointed Capt. Roy Ukpebo Ilegbodu as its new manager.
“It was gathered that the beleaguered airline was indebted to alone to the tune of over N300bn, with AMCON alone owed N135bn; while its obligations to aviation fuel suppliers, insurance firms, aircraft maintenance organisations, the Federal Government and the various aviation agencies, as well as food vendors made up the balance.”
In the same vein, on April 12, 2017 the Daily Post published a story titled, ‘Arik Air: AMCON gives breakdown of N375bn debt’ and went further to report, “The (then) Receiver Manager of Arik Air, Mr Oluseye Opasanya (SAN), said the embattled airline is indebted to its trade and finance creditors to the tune of N375 billion. Opasanya made the disclosure in an affidavit filed in support of the airline’s receivership by the Asset Management Corporation of Nigeria (AMCON), before Justice Muhammed Idris of a Federal High Court in Lagos.AMCON had on February 9 taken over Arik Air as a result of its huge debt profile and thereafter appointed Capt. Roy Ilegbodu to manage the airline under the receivership of Opasanya.”
But in a recent press statement from AMCON, signed by Simon Tumba of SY &T Communications Limited, a PR Consultant to the Receiver Manager, it stated in part that: “The investigation is apparently based on a petition filed by Mr. Femi Falana, SAN (the Petition) and was instigated by Sir Arumemi Johnson, the majority shareholder in Arik, which owes AMCON about ₦240 billion as at May 31, 2023. Sir Arumemi Johnson guaranteed, and therefore is by law an obligor in respect of, this indebtedness and is personally liable for them.”
Reacting to the statement, the media team of the shareholders of Arik Air issued its own statement in response to the debts and other issues raised by AMCON and stated as follows: “However, we wish to state that before the receivership by AMCON; Arik Air Limited was valued at the sum of $3.7B by the Delloite of London. This valuation is a product of months of forensic review of all assets and visits to all worldwide stations, including the Nigerian base by the valuers in 2014.While it should be recalled that AMCON through an exparte order in suit No, FHC/L/CS/175/17obtained on 8th February in 2017 based upon allegations of indebtedness of N141 billion, the sum which is less than 5% of the valuation of the airline.”
The Genesis
How did this debt come about? It was a guarantee of foreign aircraft financing credit facility obtained by Arik Air from European Credit Agency (ECA) around 2008. It was Union Bank that provided that local bank guarantee for the loan. Because there was no financial transaction involved, the guarantee was treated as off balance sheet transaction, but a CBN policy prompted AMCON to demand it should be changed to on balance sheet transaction and with that transaction, it became a single limit obligor. This means that the amount is more than the limit the bank can lend to one customer.
An inside source explained further to THISDAY, saying: “By the CBN regulations governing the single obligor limit, a bank is not allowed to grant more than 20% of its shareholders funds to any one person (natural person or corporate body) including the subsidiaries, associates and the related parties of such a person. A bank is also not allowed to grant loans. But you have to note that money wasn’t lent to Arik by Union Bank; it was only a guarantee that they offered and they chargedArik for that guarantee, In addition, Arik had a sales collection account with the bank from where it had serviced that ECA finance facility diligently for three years before the sudden CBN policy changed to save the banks; so, really, the policy changed to save the banks resulted in killing businesses in other sectors, including aviation.”
Arik Air Takeover
The Arik Air Receiver Manager, Kamilu Omokide, explained to THISDAY that Union Bank was down and in order to save it from going under, AMCON had to intervene. “So, AMCON had to de-risk the balance sheet,” and converted the guarantee given to Arik Air by Union Bank to debt. Omokide also told THISDAY that initially it was never AMCON’s intention to take over Arik Air because it devised its own strategy, admitting that it did not have the competences to really effectively manage the airline.
Omokide also said that before it fully took over the management of the airline, it deployed one Mr. Tajudeen Ahmed to oversee activities at Arik Air but he did not throw more light on why AMCON decided to fully take over the airline.
“We deployed officer to oversee the activities at Arik Air. We had Tajudeen Ahmed. We had him sit to watch what they were doing, but we realized that it was a system that would not work,” he said, insisting that the airline was given too much opportunity.
Omokide has severally called on the founder of the airline, Sir Arumemi Johnson to come up with solution to resolve the issues between Arik Air and AMCON.
“He should come up with a solution. He should come with a proposal. We want him to tell us what he wants. This public drama will not write off the debts. AMCON can forgo some of the debts. I effectively managed the company. The debt can be renegotiated if he is willing to play. At the risk of being called a compromiser I can facilitate it so that Sir Johnson can cut a deal with AMCON,” he told THISDAY.
Ruined Enterprise
But industry insiders conversant with the transactions at Arik Air told THISDAY that ideally it was the creditors of the company that were supposed to appoint a Receiver Manager and the objective of the Receiver Manager would be to recover the debts of the creditors by rebuilding the company and possibly selling it, but now the company has been ruined because it has been poorly managed since AMCON took it over.
“If they sell the company the way they have run it down they will not recover anything. The essence of appointing the Receiver Manager is to recover the company and to revitalise the company. The creditors should have appointed the Receiver Manager. So, now they are asking for negotiation what are you going to negotiate,” the stakeholder said.
“AMCON bought the loans to save the banks. If it was a non- performing loan you look at the collateral. If the collateral has lost value under your management, the loan will also lose value, so, you write it off. This is because the major reason you are put in the management of the company is to revitalize it,” the stakeholder further said.
Another industry stakeholder conversant with the Arik Air issues with AMCON told THISDAY that the airline’s shareholders asked for the statement of affairs of the company under AMCON, which Omokide refused to give, noting that the statement of affairs would have aided equitable negotiation.
“Now, he has complicated the situation when he disobeyed a recent Federal High court order that he should file the audited accounts of the company with Corporate Affairs Commission.This, again, is another chance and opportunity to sit together and reconcile accounts as creditor and debtor through properly audited accounts. Again, now that he has failed and even denied the shareholders access to the company premises, he had given himself away as covering something. Really this kite of willingness to broker negotiation is a desperate attempt to cover a nine-month pregnancy with a finger, How do you run another man’s business after you threw him out through a court and failed to render accounts when the same courts so ordered. That’s impunity taken too far,” the stakeholder said.
Cannibalised Aircraft
However, it has earlier been reported that under the management of AMCON, 14 aircraft worth over $1 billion bought brand new were cannibalized since it took over the company’s operations under receivership.
Informed source gave the list of the aircraft that were allegedly cannibalised and destroyed by the management of AMCON under receivership to include: Boeing B737 with registration number, 5N-MJC, Boeing B737 with registration number, 5N-MJD, Boeing B737 with registration number, 5N-MJJ, Boeing B737 with registration number 5N-MJK, and Boeing 5N-MJF. There were also Boeing aircraft painted in NG Eagle livery, which include Boeing 737 with registration number, 5N-BXV, Boeing B737 with registration number 5N-BXW and Boeing B737 with registration number, 5N-BXX. All the Boeing aircraft in Arik Air fleet are New Generation (NG) model, which are either Boeing 737-700 or 800 NGs.
There were also CRJ 900 aircraft that were also torn apart, which include 5N-JEC, 5N-JED and 5N-JEE. In addition to these, were three Bombardier Q400, which include 5N-BKV, 5N-BKU and 5N-BKX.
But Omokide who spoke to THISDAY, denied that the aircraft were stripped and cannibalised, insisting that the equipment could be restored within a short period of time if money were made available. Also, Simon Tumba who spoke on behalf of Omokide, claimed that some of the equipment removed from the aircraft were kept in storage, but this was not confirmed because informed source told THISDAY that the aircraft equipment from the cockpit was not found in the company’s spares store.
It is hoped that AMCON and Arik Air will find a way to resolve the problem that is almost threatening the existence of Nigeria’s foremost airline that was 100 per cent private sector driven and had over 3, 500 workers at its peak of operation.
