By Ademola Alawiye

Friday, 31 Dec 2010

The Asset Management Corporation of Nigeria will today (Friday) sign debt-purchase agreements with 21 Deposit Money Banks in the country.

The Managing Director of the corporation, Mr. Mustafa Chike-Obi, told our correspondent that AMCON had sealed deals with 21 banks.

He said Citigroup Incorporated and Standard Chartered Bank Plc were not participating in the bad loan purchase deals because they had no reason to do so.

One bank has, however, not submitted its proposal. But Chike-Obi did not disclose the name of the bank.

He noted that AMCON would sell N1tn ($6.5bn) of consideration bonds and use the proceeds to buy debts arising from the banks‘ non-performing loans.

Chike-Obi had told our correspondent, ”Our estimate of the amount of loans we will be buying in this first phase is in the neighbourhood of between N800bn and N1tn. And we are pleased to say that, from the submissions we‘ve received, we are in that range. It is important to note that the amount we are paying for these loans is different from the face value of the loans. The aggregate face value of those loans is about N2.2tn. We are buying them at an appropriate price of between N800bn and N1tn.

”The end process is that we take delivery of the non-performing loans, and the banks, instead of being stuck with illiquid, non-performing assets, have bonds that they will cash as they make new loans, and use the proceeds to fund the new loans. They can create new portfolio of loans in line with CBN‘s prudential guidelines. And as they make loans, they will be able to fund them.”

He pointed out that the corporation had a formula for the margin loans and that there were prices for all listed securities.

”For loans secured by things other than listed shares, we have time to deal with the issue, so it is not going to be difficult at all,” he added.

Chike-Obi had said in an interview with our correspondent that the corporation would sit down with the debtors on how to repay the loan.

He said, ”When we acquire these loans, we will then need to sit down with the debtors, what I call the restructuring stage. We sit down with each of them, understand their situation and try to get to a point that is helpful to them, but also responsible to the taxpayers.”

Chike-Obi added, ”We have three stages of work. One is what I call the acquisition of the NPLs. Right now, we are in the acquisition stage, which will be over by the second quarter of next year. But as we acquire loans, we will start the restructuring phase. That will probably go on till the end of the third quarter of next year.

”By the end of the third quarter, the loans that we cannot restructure will result in us getting some assets. When we get those assets, we are going to manage them for a while.”

Source: Punch