AMCON’s bid to return Arik Air to founder fails twice over N240.3b debt

Arik Air
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Fresh facts have emerged in the conflict of interest between the shareholders of Arik Air and the Asset Management Corporation of Nigeria (AMCON), with the latter showing evidence of failed attempts to return the airline to its founder.

AMCON and Arik Air (in-receivership), which had been accused of barring the major shareholders from access to the airline’s headquarters, showed efforts at an amicable resolution of the difference, but for the yet unresolved payment plan for debt over N240.3 billion, as of May 2022.

Recall that AMCON, the special debt recovery vehicle of the Federal Government, took over Arik Air in February 2017 as part of measures to “save” the airline from “imminent collapse”. AMCON had cited gross mismanagement by the owners of Arik, and debt above N300 billion.

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In a recent twist to the development, the Chairman of Arik Air, Johnson Arumemi-Ikide, lately attempted to reclaim the airline’s headquarters following a Federal High Court ruling that faulted AMCON on transparency, transfer of Arik’s asset to float a new airline, and barring of Arumemi-Ikide and co. from the Arik Air facilities.

The Guardian yesterday learnt that the major shareholders of Arik Air, led by Arumemi-Ikide, had on at least two occasions – in 2018 and 2022 – called for amicable settlement of the debt, which were welcome by AMCON and Arik Air (in-receivership).

In a 2018 memo to AMCON, the shareholders had hinted at a ready investor willing to settle Arik’s outstanding. The Management of AMCON agreed (subject to regulatory approvals) to settle the then indebtedness of Arik Air with the payment of the sum of N65 billion to AMCON in full, and the final settlement of AMCON’s debt of N135.3 billion.

Also, payment of the sum of N26 billion to AMCON concerning Zenith Bank Plc’s exposure was taken over in full and final settlement of all debts owed to Zenith Bank Plc. Payment of a sum equivalent to 65 per cent of the debt owed to Access Bank Plc (N7.6 billion) and EcoBank Plc (N5.2 billion), respectively. Furthermore, the condition that the company will bear the cost and expenses incurred post receivership.

It was agreed that, “Upon payment of the debts to AMCON and the banks, the receivership will be terminated and Arik Air Limited returned to its shareholders/owners alongside all documents and securities held by AMCON and the banks”.

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According to AMCON, “in response to repeated requests for a proof of funds, (the shareholder) introduced SJ Global as a potential investor. Unfortunately, their purported letter of funds in Citi Bank, Hong Kong, turned out to be spurious and fake. After this, the shareholder of Arik through various emails intimated AMCON about some expected funds from U.S.”

Though AMCON continued to trust and proceeded to issue the offer for settlement, “the shareholders of Arik were unable to perform until the offer expired.”

Again, following a December 2019 letter, the major shareholders of Arik approached AMCON for a meeting to negotiate a discount on the expired offer to pay N65 billion. The Receiver Manager invited them to a meeting with the Management team of AMCON. No further reply was received, though later blamed on the ill health of the Arik founder.

In a May 18, 2022 letter to AMCON, settlement proposals were again made by Arik Air shareholders. This includes the proposal to pay N18.2 billion as full and final payment for both AMCON and Zenith Bank exposure – 80 per cent discount on the sum of N91 billion (being the total of the N65 billion and the N26 billion in our April 11, 2018 offer).

Also, five per cent as a down payment in cash or asset or a combination of both and a balance payment over a 10-year tenure with a two-year moratorium. Balance at zero interest throughout the tenure and a further five per cent discount, if the balance is paid two years earlier.

The shareholders further, “request on AMCON to assist to remove Arik from CBN debtors list and assist to obtain funds for capital injection to rebuild the airline at BOI interest rate.

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“AMCON to assist to get concessions from CBN for Arik Air to get access to foreign exchange directly from CBN to repair, refurbish grounded and presently unserviceable aircraft and purchase spares to restock for efficient operations of the Airline.

“AMCON to assist the Airline in discussions with various debtors when and if necessary. Once an agreement is reached, this will be presented to the court as a consent judgment and all cases in courts should be withdrawn by both parties.”

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AMCON, however, declined to accede to the proposal “as it does not meet settlement expectations.”

Upon receivership in 2017, AMCON disclosed that “Arik did not have adequate cash available even for a week’s operations. Out of the 30 aircraft on the records of the company, only eight aircraft were on the ground and immediately available for operations.

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“The company was heavily indebted to Lufthansa Technic; its long-standing Maintenance Repair Organisation (MRO) and they had withdrawn their services and left Nigeria. They were replaced with Ethiopian Airlines (MRO). These were also being owed at the commencement of the Receivership.

“SAMCO Aircraft Maintenance Limited (SAMCO), a Dutch company responsible for maintaining the CRJs and the Q400s, was owed over EURO2.4 million representing nearly six months of obligations.

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“Outstanding salaries owed to indigenous and expatriate staff. The work environment was toxic, with many disgruntled staff due to unpaid salaries. Salaries of the expatriate staff and crew were unpaid. Some since July 2016. Some Nigerian Pilots had not been paid since October 2016. In addition, salaries for other local staff had been outstanding since December 2016.

“Health insurance for the employees had expired and was not renewed. Staff and company pension contributions were unremitted for years.

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“Recency training for many pilots necessary to certify pilots for the flight was suspended due to lack of funds. This involves simulator training, available abroad. All training schools were owed and had refused further credits. Thus, pilots were grounded, and many flights could not be properly crewed.

“Hotels housing crew and expatriate staff were not paid. In some cases, rents on the apartments of foreign crew/engineers were outstanding. The company was stranded. Arik was cancelling flights due to its inability to be fuelled on credit or to pay fuellers upfront as there were outstanding payments owed to aviation fuel suppliers.

“Outstanding insurance premium on the aircraft; etc. The insurance policy for the airplane fleet was due to lapse on Friday, 10 February 2017, and the Company was already owing N418.89 million as arrears of unpaid premiums. Lack of maintenance reserves. There was no Arik maintained reserve to overhaul planes.

“Leases on two A330 planes from subsidiaries of Standard Charter were outstanding for over six months. Mercator, the company with the rights and responsibilities for the management of the Passenger Service System and sale of tickets, was owed $2.5 million. They subsequently cut the company off from using the platform.

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“Curiously, even the internet subscription offered by Globacom was suspended due to overdue payments. A good number of the aircraft were at different locations and in various states of disuse. Some of the aircraft had been robbed of vital parts.”

Credit: The Guardian

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Sanya Onayoade

Continental Editor, North America

SANYA ONAYOADE is a graduate of Mass Communication and a Master of Communication Arts degree holder from the University of Ibadan. He has attended local and international courses on Media, Branding, Public Relations and Corporate Governance in many institutions including the University of Pittsburgh; Reuters Foundation of Rhodes University, South Africa and Lagos Business School. He has worked in many newspaper houses including The Guardian and The Punch. He was the pioneer Corporate Affairs Manager of Odua Telecoms Ltd, and later Head of Business Development and Marketing of Nigerian Aviation Handling Company (NAHCO Plc).

He has led business teams to several countries in the US, Asia and Europe; and was part of an Aviation investment drive in West Africa. He has also driven media and brand consultancy for a few organizations such as the British Council, Industrial Training Fund, PKF Audit/Accounting Firm and Nigeria Stability and Reconciliation Programme. He is a Fellow of Freedom House, Washington DC, and also Fellow of Institute of Brand Management of Nigeria. Sanya is a member of Nigerian Institute of Public Relations (NIPR), Advertising Practitioners Council of Nigeria (APCON) and Project Management Institute (PMI). He is a 1998 Commonwealth Media Awards winner and the Author of A Decade Of Democracy.
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Morak Babajide-Alabi

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Morak Babajide-Alabi is a graduate of Mass Communication with a Master of Arts Degree in Journalism from Napier University, Edinburgh, United Kingdom. He is an experienced Social Media practitioner with a strong passion for connecting with customers of brands.

Morak works as part of a team currently building an e-commerce project for the Volkswagen Group UK. Before this, he worked on the social media accounts of SKODA, Audi, SEAT, CUPRA, Volkswagen Passenger Cars, and Volkswagen Commercial Vehicles. In this job, he brought his vast experience in journalism, marketing, and search engine optimisation to play to make sure the brands are well represented on social media. He monitored the performance of marketing campaigns and data analysis of all volumes of social media interaction for the brands.

In his private capacity, Morak is the Chief Operating Officer of Syllable Media Limited, an England-based marketing agency with head office in Leeds, West Yorkshire. The agency handles briefs such as creative writing, ghostwriting, website designs, and print and broadcast productions, with an emphasis on search engine optimisation. Syllable Media analyses, reviews, and works alongside clients to maximise returns on their businesses.

Morak is a writer, blogger, journalist, and social media “enthusiast”. He has several publications and projects to his credit with over 20 years of experience writing and editing for print and online media in Nigeria and the United Kingdom.

Morak is a dependable team player who succeeds in a high-pressure environment. He started his professional career with the flagship of Nigerian journalism – The Guardian Newspapers in 1992 where he honed his writing and editing skills before joining TELL Magazine. He has edited, reported for, and produced newspapers and magazines in Nigeria and the United Kingdom. Morak is involved in the development of information management tools for the healthcare sector in Africa. He is on the board of DeMiTAG HealthConcepts Limited, a company with branches in London, Lagos, and Abuja, to make healthcare information available at the fingertips of professionals. DeMiTAG HealthConcepts Limited achieved this by collaborating with notable informatics companies. It had partnered in the past with Avia Informatics Plc and i2i TeleSolutions Pvt.

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Ademola Akinbola

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Brief Profile of Ademola Akinbola

Ademola AKINBOLA is an author, publisher, trainer, digital marketing strategist, and a brand development specialist with nearly three decades of experience in the areas of branding, communication, corporate reputation management, business development, organizational change management, and digital marketing.

He is the Founder and Head Steward at BrandStewards Limited, a brand and reputation management consultancy. He is also the Publisher of The Podium International Magazine, Ile-Oluji Times, and Who’s Who in Ile-Oluji.

He had a successful media practice at The Guardian, Punch and This Day.

He started his brand management career at Owena Bank as Media Relations Manager before joining Prudent Bank (now Polaris Bank) as the pioneer Head of Corporate Affairs.

The British Council appointed him as Head of Communication and Marketing to co-ordinate branding and reputation management activities at its Lagos, Abuja, Kano and Port Harcourt offices.

In 2007, he was recruited as the Head of Corporate Planning and Strategy for the Nigerian Aviation Handling company. He led on the branding, strategic planning and stakeholder management support function.

His job was later expanded and redesigned as Head of Corporate Communication and Business Development with the mandate to continue to execute the Board’s vision in the areas of Corporate Planning and Strategy, Branding and New Businesses.

In 2010, he voluntarily resigned from nacho aviance to focus on managing BrandStewards, a reputation and brand management firm he established in 2003. BrandStewards has successfully executed branding, re-branding and marketing communication projects for clients in the private and public sectors.

Ademola obtained a M.Sc. Degree in Digital Marketing & Web Analytics from Dublin Institute of Technology in 2016, and the Master of Communication Arts degree of the University of Ibadan in 1997. He had previously obtained a Higher National Diploma (with Upper Credit) in Mass Communication from Ogun State Polytechnic, Abeokuta.

He has published several articles and authored five management books.

He has benefitted from several domestic and international training programmes on Brand Management, Corporate Communications, Change Management and Organizational Strategy.
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