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•Demands credible resolution strategies from airline’s founder
By Amaechi Ogbonna and Chinelo Obogo
Asset Management Corporation of Nigeria (AMCON) has urged the founder of Arik Air, Sir Johnson Arumemi-Ikide, to present a resolution strategy that ‘makes sense’ to the Central Bank of Nigeria and the Ministry of Finance, on how its debt will be paid off.
At a press briefing in Lagos on Monday, the Managing Director of AMCON, Ahmed Kuru, said the airline which has been under its receivership was heavily in debt before it was taken over and that according to security reports, the firm would not have lasted for longer than two weeks if the Federal Government had not intervened.
He however said that AMCON was ready to negotiate with Arumemi-Ikide, on returning the airline to him.
“The challenge of Sir Arumemi Johnson’s Arik Air Limited (in Receivership) under the auspices of AMCON, may seem difficult, but the situation is not irredeemable. There is always a way out of every resolution situation however, there must be a situation of give and take, which is what we (AMCON) have been trying to achieve. We are ready to sit down with the owner or owners of Arik if they are ready to agree on what makes sense to us, to them, and the Federal Government.
“When we engage and arrive at that agreement, we will as AMCON go back to the Central Bank of Nigeria (CBN) as well as the Ministry of Finance (MOF), and share such resolution strategy with them. In the past, we resolved issues that are more difficult and more complicated than the Arik issue in the banks, oil and gas, manufacturing sector, real estate and investment, automobile, telecommunications, just to mention a few. But for any resolution to take place, two or more parties involved must have understanding. We are convinced that there is always a way out.
“We are ready to negotiate ownership with the leadership of Arik. There is always a way out, it is just a question of give and take. What is important is for us to sit down with the owner of Arik, if he is ready and agree on what makes sense to him and to us. Sometimes, when you look at the feasibility of keeping the business going, it also makes you to give more concession. But the other party must come with a mindset that they are ready for a resolution.
“On whether we want to increase the fleet, unfortunately, you can’t take good money and keep putting into that kind of business, you just have to find a resolution. We continue to maintain in private and in public that we want to have a conversation.
So many people have come to us and we have encouraged them to encourage the other side to come and talk to us. But at the end of the day, if they don’t, we have to come up with a strategy on how to move forward because the current situation is not sustainable and we can’t carry more money and put there because there is no money to even put, so within the laws of AMCON, there are provisions to deal with these kinds of situation,” Kuru said.
On the plans to set up another airline, he said: “When we entered Arik, the intention was to stabilise it and not for recovery because government was interested in seeing it survive. We realised that there must be an exit and besides the debt hanging on Arik, there were also many creditors. As an airline, Arik has many challenges, both local and international, so what we decided to do was to sell off some of those assets that were in Arik into a new airline that we would set up. We then started the process of setting up NG Eagle and when we were just trying to get the license, the aviation industry accused us of trying to set up a national carrier, so we were frustrated. There were three aircraft that were branded sitting on the tarmac for NG Eagle to start off. We were not able to deal with and had to find a way of dealing with it by selling the process to someone who is able to continue it.”
On the recovery that it has achieved from different businesses, Kuru said: “We have so far recovered more than N3.9 trillion both from the sinking funds, which is contribution from the banks and for the recovery, we have made almost N1.4 trillion which is more than 70 percent. Unfortunately, because the loans were purchased with bonds, as you are recovering, there is also interests to be paid averaging around 11 percent. A lot of recovery has been made but it looks like there is no impact because of the interest rate on the loans. From about 12,000 accounts, we focused on 350 which represents 84 percent of all the cases we have and out of this, 264 cases represent N3.64 trillion is what is owed, so, we focused on the 350 because over 12,000 represents less than 20 percent.”
The receiver manager of Arik, Kamilu Omokhide, told Daily Sun that the total funds injected into the airline is N114.3 billion and that it would be difficult to keep injecting funds into it. “The total loan we bought for Arik was N85 billion but we wrote off N15 billion and restructured N70 billion for nine years and the simple interest per annum was N8.4 billion from 2012 but the company only managed to pay back N1.2bn. In addition to the N70 billion, AMCON also injected N21.3billion as operational capital at three percent interest rate annually. On that, Arik paid only N3.5 billion out of N21.3 billion. In 2018 when we were trying to settle with them and Zenith Bank said they were not even willing to have a discussion, AMCON again bought another loan and injected N23 billion into the airline.,” he said.
