By Stanley Opara

Monday, 17 Jan 2011

There are strong indications that more Deposit Money Banks, especially the rescued ones, are seriously strategising to exchange their bad loans for the Asset Management Corporation of Nigeria’s bonds on offer.

Some of the banks that have yet to exchange their non-performing loans with the bonds issued by AMCOM, our correspondent gathered, were working towards ensuring that deals were concluded in the shortest possible time.

AMCON recently completed the process of purchasing non-performing loans of 21 out of the 24 DMBs in the country. As at last weekend, only Intercontinental Bank, Oceanic Bank and Union Bank had officially announced their bad loan swap arrangement with AMCON.

Our correspondent gathered from sources close to one of the rescued banks, Afribank Nigeria Plc, that the bank had put a structure in place to ensure that it maximised what would be realised from the deal with the ‘bad bank’ (AMCON).

“Right now, a strategy group has been set up to manage AMCOM and Afribank’s relationship in this regard,” a source said.

“The bank is however, optimistic that when the deal is finally struck between it and AMCON, the result would be in the best interest of both parties,” the source added.

Our correspondent also gathered from sources close to Bank PHB that the bank had made significant strides to exchange its non-performing loans with AMCON’s bonds.

Though the deal had not been made public, the sources, however, said the bank might have got about N140bn from its N300bn non-performing loans presented to AMCON.

AMCON, last week, said it planned to issue an additional N500bn ($3.3bn) in zero-coupon bonds to clear up remaining bad bank loans by March 31.

Its Chief Executive, Mr. Mustapha Chike-Obi, said the ‘bad bank’ had issued three-year zero-coupon bonds with a face value of N1.03tn to 21 lenders in December in exchange for non-performing loans, paying out a discounted total of N770bn.

He said margin loans accounted for about 40 per cent of the total non-performing loan purchase.

“We are going to clear up everything by March 31 and at that point we would have issued proper bonds, fully tradeable. I think we will be spending around N500bn more,” he added.

Oceanic Bank said it had received around N200bn from AMCON, while Intercontinental Bank also said it received over N146bn and expected additional bonds in a subsequent purchase.

Wema Bank may have received over N15bn from AMCON following comments from its Group Managing Director/Chief Executive Officer, Mr. Segun Oloketuyi in December, that the bank was working towards raising about N15bn from AMCON.

AMCON had said in December that it would register to issue up to N3tn in tradeable bonds, although it expected to use only N2.4tn-N2.6tn 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 $4bn Central Bank of Nigeria bailout in 2009 and to restore lending in Nigeria’s economy.

 

Source: Punch