Exclusive… Bad debts: Bankers’ committee indicts Ecobank

In from Ali Smart…

The Sub-committee on Ethics and Professionalism of the Bankers’ Committee has ruled that the agreement between Honeywell Group and Ecobank to pay the sum of N3.5 billion as full and final payment of the borrowers’ indebtedness is valid and should be complied with.

The indictment of Ecobank by the Committee is coming ahead of plans by the Central Bank of Nigeria to publish names of those indebted to banks nationwide come August.

According to the Committee, Ecobank has no justification whatsoever to victimize Honeywell Group over a subsisting agreement between both parties.

Ripples gathered that the committee which submitted its report to the Bankers’ Committee on the 2nd of June 2015 said it found after investigations that the transaction involved a legacy (Oceanic Bank Ltd) and living bank Ecobank and that the bank did not go through its Board for approval on the concession granted to Honeywell Group.

According to the committee’s findings, the sum of N3.5 billion paid by Honeywell Group was in line with the agreement reached by the two parties on 22nd July 2013 and that Ecobank’s behaviour was “considered as unethical.”

It was revealed that “based on the legal opinion and clarification sought from the Banking Supervision Department of the Central Bank of Nigeria (CBN), Chairman of Honeywell Group was not a ‘related party’ to the transactions as he was not a member of the board of Directors of Oceanic Bank at the time the transactions were consummated.”

The committee noted that “as at the time Ecobank Nigeria Limited acquired Oceanic Bank ltd and by implication the Honeywell Group loan facility, and commencement of discussions with Ecobank, the Chairman, had left the Board of Ecobank Transnational Incorporated (ETI) as a director.”

In its defense before the committee, Ecobank said it “was not attempting to renege on any agreement” because, “Honeywell Group did not meet the terms of the in-principle agreement.”

Ecobank said that at the meeting of July 22, 2013 there was an in-principle agreement/understanding for the payment of total sum of N3.5 billion. The initial payment was to be an immediate good faith payment of N500 million while the balance of N3 billion was to be paid within two (2) weeks of July 22, 2013 before the CBN examiners in the bank concluded their examinations, and subject to the approval of its board of directors.

The bank said that its letter of July 22, 2013 reiterated the need for the in-principle proposed concessionary payment to be made before the conclusion of the CBN examination. As the examiners were at the point of concluding the examination, the bank projected that the payment of the sum of N3.5 billion on the three accounts within the two weeks might prevent the threatened downgrade.

Although Honeywell Group made a payment of N500 million in July 25, 2013, the company did not pay the balance of N3 billion before the CBN examiners left the bank “the issue of calling or writing to establish the timeline was not necessary as it was confirmed in the bank’s letter of July 22, 2013.”

Ecobank added that “the in-principle understanding of July 22, 2013 could not have been reiterated in December 2013, long after the CBN examiners had left the bank as it no longer existed since the fundamental conditions were not met, and that the completion of payment of N3.5 billion on January 30, 2014 was uneventful as it occurred long after the timeline and therefore was not considered as full and final settlement of the debt.”

Ecobank said it duly acknowledged the cumulative payment of N3.5 billion in a letter dated February 2014 but never committed to issuing letter of discharge of the debt or the removal of the debt from the Credit Bureau because the in-principle proposed concessionary payment had lapsed and was no longer in effect.

The bank also added that it’s letter of November 14, 2014 was a response to the letter of Honeywell dated September 01, 2104, reiterating the position of the board of directors of the bank on the Honeywell Group’s request for the proposed concession. Noting that “prior to the letter, the chairman of Honeywell Group had several discussions with management of the bank at which the management of the bank reiterated that the in-principle concessionary payment had lapsed.”

It was equally stated that “the delay of Honeywell Group in taking advantage of the in-principle proposed concession and the timeline for same, led to the intervention of the CBN and its directives to the bank to recover the total outstanding amount. The CBN and NDIC had in their risk based supervisory report on the bank as at June 30, 2014 directed the bank as follows: Facilities amounting to N5.3 billion owed to the defunct Oceanic bank by companies relating to Oba Otudeko, an ex director of Ecobank Transnational Incorporated (ETI) had not been fully paid. Only N3.5 billion had been paid thereby leaving a balance of N1.8 billion despite the following facts:

. The customer has ability to pay

. The agreed date of settlement had lapsed

. The customer was an ex-director of ETI which is parent company of Ecobank Nigeria Ltd i.e., an insider whose facility can only be written off with the approval of CBN, which has not been obtained and that

. The customer is the current Chairman of FBN Holdings Plc.

Based on these facts according to Ecobank, it’s “management was required to ensure that the obligor pays up the outstanding balance of N1.8 billion and forward an update to the director BSD, CBN and Director BED NDIC, within 30 days of the receipt of this report.”

Ecobank argued that the balance outstanding on the three accounts as at March 31, 2015 are: Anchorage Leisure N805,223,592.03; Siloam Global N2,812,361,174.69 and Honeywell Flour Mills N217,625,148.77

Details of the debt reveal that Anchorage Leisure received a N450 million project facility granted it in 2006. The facility was used to fund the construction of the RaddisonBlu Anchorage Hotel. Unfortunately, the project experienced significant delays due to factors which were out of the control of the management during the construction period and this led to considerable cost overruns. This became a heavy burden on the capital structure of the project and hampered the ability of the project to payback the capital taken.

Secondly, Honeywell Flour Mills was in September 2008 granted a margin facility by Oceanic Bank to the tune of N9.3 billion. Following an agreement between the parties in March 2010, the underlying assets were disposed and the proceeds applied towards the facility. The balance of N2.5 billion was rescheduled after a bullet payment of N6 billion had been made by Honeywell into the account.

Finally, Siloam Global Limited’s indebtedness was an underwriting commitment for the sum of N2.56 billion which was converted into loan in December, 2011, in line with a put option agreed between Oceanic Bank and Honeywell Flour Mills Plc. However, as a result of general downturn in the capital market, the underlying assets suffered significant diminution in value.

In 2012, Honeywell commenced discussions with Ecobank with a view to agreeing to a full and final settlement of the indebtedness of three of its operating companies mentioned above.

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