AMCON vs Shebah: The unheard story •How not to encourage investors

Posted by Olusugun Adeoye | 4 September 2019 | 820 times

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The media recently had reports on an interim order obtained by AMCON appointing a receiver/manager of Dr. ABC Orjiako’s assets in Nigeria and abroad, including Shebah Exploration & Production (E&P) Company Limited, as well as Allene BVI Limited.

We all know that stories are better told, if not more interesting to readers when underlying questions are being asked to unravel the facts.

Yes, AMCON makes the move in line with the tenets of its existence but ignoring the questions bothering on how or what transpired in the long transactionary processes remain gravey decisions that have negative impact on businesses.

No doubt, most industry watchers and legal experts are keenly following this development especially as it tests much touted collaboration with respect to cross border laws, litigation and enforcement of judgement.

Like AMCON, every other government established institution is meant to encourage investments. Truly, opportunities abound in the Oil & Gas sector of the economy but many of such opportunities are in no doubts capital intensive and most times carry significant Capital Expenditure (CapEx) risks.

These risks with cost overruns and schedule delays being common are often times underestimated by most financiers.

While loan facilities are good for viable businesses, they can fairly be tagged "bad", if well established that there is no intent to repay. Interestingly, this is not the case in this issue trending against Dr Orjiako.

The message is that whether recent developments are deliberate or not, truth be told that any stone thrown at him will be better described  as one detrimental to the economy because he had positively changed the global narratives about doing business in Nigeria as shown in areas his footprints are.

Disappointingly, this is happening when President Muhammadu Buhari is looking forward to investors making inroads into Nigeria as evidenced in his recent trip to Japan.

Aside Seplat, ABC Orjiako is on the board of companies in various sectors; he is the chairman of Neimeth Pharmaceutical International plc, which is listed on the NSE; a director of MPI, which is listed on NYSE Euronext Paris and a director of Leadway Assurance Company Limited.

By invitation of the London Stock Exchange, he became a founding member of the London Stock Exchange Group’s Africa I Advisory Group (LAAG), a select group working towards generating and channeling ideas and problem solve towards the issues affecting the African continent from a commercial and social perspective.

How it all started

In 2012 Shebah E and P obtained a $150million loan facility from a consortium of banks (AFREXIM/Diamond- now Access/Skye- now Polaris) led by AFREXIM.

The loan facility was meant for work over and drilling campaign at the Ukpokiti field (OML 108) operated by Shebah E&P.

In the offshore Niger Delta, Shebah drilled a successful horizontal well, the first of its kind and tested 4000 barrels per day of oil and condensate production but encountered large gas reserves.

Then, the company decided to find a solution to the huge associated gas based on professional oil field best practices before continuation of the oil/ condensate production. Shebah required more funds to commercialise the gas to avoid excessive flaring while producing the discovered oil. Then, AFREXIM led consortium of lenders, could not provide further facilities to Shebah to conclude the operations. In 2014, Shebah approached Zenith Bank, which appraised the situation and provided a $200 million loan facility fully approved by its board to rescue the situation.

Zenith proposed to pay the consortium of banks $50million to reduce their collective exposure, enhance the facility to $300 million, provide Shebah with additional funds to monetise the gas and produce the discovered oil.

The enhanced facility would have had Zenith join and lead the syndicate with $200 million, while the consortium of existing lenders would have reduced their exposure and stay at $100million (about $33 million each).

In line with Shebah’s need, Zenith further requested to have a moratorium period of nine months to conclude the projects and extend the facility tenure to five years. This was meant to spread the cash flow and enable easy repayment of the enhanced facility. Surprisingly, the AFREXIM consortium rejected the $50 million offered by Zenith Bank on the grounds that Zenith should not lead the syndicate and they were not willing to extend the tenure of the facility which was remaining about two and half years as at the time of Zenith’s offer.

The AFREXIM consortium rejected all the efforts being made by Shebah and proceeded to file an action to call the facility in 2014 (just two years after final draw down). The call of facility ahead of the maturity triggered the default on the loan. On February 19, 2016, Mr. Justice Phillips of the London High Court delivered a judgement in favour of the AFREXIM consortium for the repayment of the $150 million loan facility.

The judgement creditors then registered the judgement in Federal High Court in Lagos and applied for enforcement of the judgement. The defendants (Shebah Exploration & Production and ABC Orjiako)  immediately opposed the registration and the enforcement of the judgement based on their convictions on rule of law and on the fact that they would like to negotiate an out of court settlement and pay back the loan under a restructured arrangement. This case is still life before an Honourable Justice of the Federal High Court Lagos. The next hearing date is in October, 2019.

Contrary to the Syndication agreement by the AFREXIM consortium, Polaris Bank unilaterally transferred its share of the judgement facility to AMCON. Notwithstanding the unilateral action by Polaris Bank, AMCON should have joined the existing court case in the Federal High Court Lagos but instead it initiated a fresh action in Federal High Court Abuja, not minding that the same case  has  already got a ruling in London and subject to a contested enforcement proceedings in the Federal High Court Lagos.

It is by the fresh case that AMCON obtained the Ex-Parte order which was reported by various media platforms.

There are indications that the second defendant (Dr Orjiako) who was the loan guarantor had provided about $68 million to Shebah to pay the AFREXIM consortium toward the repayment efforts prior AMCON’s intervention. Worthy to note this payment indicates a strong willingness to settle this debt. The media reports of AMCON’s purported move to impound the personal assets of Orjiako and Shebah can only cripple their efforts to meet the debt obligations. This portends a strong disincentive to the spirit of encouraging investments in the country.

 

•Adeoye, an economist/public affairs analyst, writes from Abuja.


Source: News Express

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