Published On: Fri, Feb 17th, 2017

Real Reasons Why AMCON Took Over Arik Air

Share This
Tags

Emerging facts have revealed the lack of financial discipline, corruption tendencies and general recklessness on the part of the Management of the Arik Air leading to the alleged bankruptcy and the eventual takeover by the Federal Government through the Assets Management Corporation of Nigeria (AMCON).

There are reports also that the mounting debt owed by Arik amounting to N300 billion and over $8 million foreign debt notwithstanding, the management resolved to float Arik Air international with the headquarters in the United Kingdom and had all the same, displaced poor attitude in management.

According to the reports, with the Nigerian mentality of business operation, the Arik Air Management international owed the British Custom millions of pound sterling, prompting threats of impoundment of some of its aircraft by the British authorities.

Worst still, some officials of AMCON told journalists in Abuja Friday that Arik Air was operating in the Nigerian Air space without a defined insurance cover over the past 5 years, an indication that any passenger who got involved in a disaster by the airline would never have been paid a dime as compensation.

It was alleged that the Management of Arik got away with its alleged infamies and abuses because previous attempts by AMCON to intervene had repeatedly been halted by even top government officials through phone calls meant to protect the over ‘influential managers’ of the airline.

Reports also revealed that the collapse of Arik Air was a disaster in waiting amid perceived inability of the airline to pay workers’ salaries, pay for aviation fuel, remit taxes deducted from its workers to the accounts of the Federal Government, pay the debt owed to insurance companies and above all service its aircrafts as demanded by law.

Situations, it was learnt, got so bad for Arik Air when it could no longer fulfil its obligations to customers since its fleet depleted to 9 from 30 which it boasted of some months earlier and had planned to officially wind down operation two weeks before AMCON announced its takeover.

Even at that, some creditors, lenders and foreign governments had planned to impound some of the remaining aircrafts in the Arik’s fleet, in addition to threats the management constantly received from litigants who obtained judgements against the airline.

As at the time AMCON took over Arik, cases of highly demotivated workforce, constant flight delays (local/ international), flight cancellations without explanation (Local/ International) and flight cancellation without refund to customers were pertinent issues known to travellers hooked to the Airline

Cases of luggage pilferage, luggage disappearances, abandonment of luggage on international routes, habitual flouting of regulatory agencies’ orders In line with Government’s statutory mandate and huge profile of non-performing loans of Arik were said to have been filed against the airline.

According to report, the intervention by the Federal Government on the case of Arik was mainly to prevent the aviation industry in Nigeria from imminent collapse since Arik remained the largest carrier in Nigeria.

FACT SHEET ABOUT ARIK’s DEBT

Below is a fact-sheet on the incongruities alleged on the part of Arik Airline and the reason AMCON stepped into take over the management.

Non-Performing loans acquired in 2011 from two distressed banks:

Union Bank Plc – N71billion

Keystone Bank Limited – N14billion (transaction originated by defunct Bank PHB

Total amount N85billion

The facilities were granted to Arik for purchase of additional aircraft and to refinance existing term loans. The default in repayment by Sir Johnson Arumemi-Ikhide, the principal promoter of Arik Air posed systematic threat to the banks and indeed Nigerian economy. As a matter of fact, Apart from AMCON, Arik is also currently indebted to other commercials including Standard Chartered, Zenith Bank, Ecobank and Access Bank to the tune of about N165billion.

*Arik owe the Federal aviation agencies and regulators N26billion

*$11 million is owed to European aviation agencies and service providers

*$20million owed to Lufthansa Technique.

In September 2011, AMCON in a bid to provide further support to Arik restructured Arik’s debt from N85billion to N70billion as a 9-year term loan running at 12% per annum. Other terms of the restructure include the following:

AMCON to appoint a resident Monitoring Manager who shall have the authority to call for any of Arik’s records for examination.

Arik to provide three-year record of its remittances to FAAN.

In all of these Arik defaulted on the term of the restructure and failed to make the monthly repayment as agreed.

Again in May 2013 AMCON sourced N26billion of the Central Bank of Nigeria (CBN)/Power Aviation Intervention Fund (PAIF) through the Bank of Industry (BOI) on behalf of Arik.

AMCON disbursed N21.38billion of the BOI loan to Arik as working capital. Out of this amount, N21.4billion was meant for reconfiguration of two aircraft from passenger to cargo carriers. This was never done as the funds were diverted by Arik management and is now the subject of EFCC investigation. Both aircraft were abandoned in the UK.

In December 2015, due to accrued interest and unpaid principal, a second restructuring was proposed for Arik debt to reduce the debt from N138billion to N90billion, which is awaiting CBN approval

This was proposed based on Arik’s plan to do a private placement and subsequently do an IPO within a period of six months. Based on that they were expecting N44billion from Afrexim as a bridge. None of this happened as Arik could not comply to any conditions given for a peaceful resolution.

In spite of the leniency and good will and good faith demonstrated by Federal Government to support an indigenous strategic business; Arik throughout the negotiations, refused or neglected to adhere to the terms of amicable settlement.

Notwithstanding, the Federal Government continued to bear the burden of repaying the BOI loan at 1% interest rate without any corresponding commitment from Arik and so far the

Federal Government through AMCON has paid N9.05billion on behalf of Arik.

Arik vehemently failed to cooperate with the AMCON resident Monitoring Manager

Arik refused to disclose financial information to AMCON. Of all our investments in Arik, AMCON total recoveries from Arik till date is N4.6billion, which is only 3.2% of current exposure

Total repayment by Arik in the last 12 months is N 50million.

About the Author

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>