On Friday, the Asset Management Corporation of Nigeria (AMCON) said that it had not foreclosed on liquidating Arik Air due to the company’s N227.64 billion debt.
Under Sir Johnson Arumemi-Ikhide, the airline had non-performing loans totaling more than N227.64 billion with Union Bank of Nigeria (UBN) and Bank PHB (now Keystone Bank), which AMCON acquired from the two banks.
Jude Nwauzor, the chairman of AMCON’s Corporate Communications Department, told reporters on Friday that the possibility of liquidating Arik Air remains open despite the airline’s repeated unsuccessful attempts to be revived.
Additionally, Nwauzor pointed out that section 48 gives the corporation the authority to designate a Receiver or Receiver Manager to seize, oversee, and dispose of the assets of a debtor business such as Arik.
He noted that liquidating Arik Air is still an option that AMCON has on the table given the legal authority it has.
He claimed that prior to the company taking over, Arik was already insolvent and poorly managed, with no kobo from anyone.
However, Nwauzor also mentioned that the Corporation had paid off its technical partners, other aviation professionals worldwide, and trade creditors for Arik’s debt.
The corporation, which still has the ability to liquidate Arik, found it difficult to manage these debts. However, we are still in charge of Arik, which was already bankrupt and remains so as we speak,” Nwauzor stated.
According to him, Arik was balance-sheet insolvent as of December 31, 2016, with total liabilities of N289 billion and a negative equity value of almost N80 billion, according to a KPMG report that AMCON had commissioned.
He added that audits for 2015 and 2016 were carried out by PwC Nigeria, the company’s longstanding auditors who were previously hired by Johnson Arumemi-Ikhide.
He pointed out that these audits verified that Arik had been declared technically bankrupt since 2014, with its liabilities surpassing its assets in 2015 and 2016 until the receivership was initiated in 2017.
“Arik’s negative shareholder capital was N139 billion as of December 2016, which is almost equal to its debt to AMCON,” Nwauzor continued.
He added that Johnson Arumemi-Ikhide, the founder of Arik, has continuously promoted a false narrative about his debt to AMCON, among other misleading assertions. He said that Arik never fell behind on its payments to Union Bank and pretended to be unaware of the sum owing to AMCON.
According to Nwauzor, Arumemi-Ikhide has also asserted that his loan was performing and that the receivership was premature.
“These assertions are deceptive. The intelligent public must wonder why the debt was sold and restructured if it was performing. And why did he consent to the reorganization? Did he meet the terms that were agreed upon?
In accordance with the Central Bank of Nigeria’s (CBN) Prudential Guidelines, Union Bank of Nigeria PLC (UBN) decided to declare the loan non-performing and sell it. AMCON voluntarily accepted Union Bank’s offer of the Arik loans and legally bought them.
UBN notified Arik in a letter dated October 22, 2010, that its loans, totaling an astounding $474 million (about N70 billion at the time), were non-performing and threatened the stability of the bank. One of the main causes of Union Bank’s financial difficulties was this loan exposure.
“It is significant to remember that in addition to Union Bank, Bank PHB (now Keystone Bank) also sold Arik’s loans to AMCON, and Arumemi-Ikhide has acknowledged this debt on multiple occasions,” he said.
He added that Arumemi-Ikhide voluntarily consented to restructure the debts after the loans were purchased, admitting the debt.
“Any challenge to AMCON’s purchase of the NPLs is, in any case, statute-barred, and the AMCON Act contains clauses that show that such a challenge cannot give rise to a legitimate cause of action.
“In any case, AMCON had extensive discussions with Arik’s management from 2011 to 2017 (who never questioned the NPLs), yet Arik continuously missed payments in spite of multiple financial concessions, promises of debt reduction, and restructuring initiatives. He stated that AMCON was forced to think about different recovery alternatives.
Nwauzor added that Arik was beset by operational issues, including as insufficient financial reserves, grounded aircraft, and growing indebtedness, when AMCON’s Receivership Team took over.
“Arik was in financial trouble and about to go out of business when the Receivership Team took over. A number of aircraft were grounded, and service providers stopped providing assistance due to outstanding bills.
The company also stated that Arik’s on-time performance (OTP) fell below 40% due to operational difficulties, which resulted in numerous flight cancellations.
“The team discovered a fleet with only eight operational aircraft when they took over the company, as opposed to the erroneous thirty being floated about.” A spokesperson for AMCON said, “A number of the aircraft needed immediate maintenance, and others had been pledged as security for Sir Johnson’s personal debts, which resulted in their seizure by creditors.”
