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How Access Bank got Japaul to pay up N37bn bad debt

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Access Bank

Following Access Bank and Diamond Bank‘s merger in 2018, the latter had loans and advances of about N787.8 billion out of which N219.9 billion in loans were impaired.

Oil and gas-related loans made up a significant chunk of the loans and were estimated at about N302.6 billion, most of them distressed.

Of the total oil and gas loans, $66.4 million was owed by Japaul Oil and Maritime. The loans had gone bad and accumulated unpaid interest of about $11.2 million.

When Access Bank took over the loans, Japaul agreed to a restructured rollover of both the principal and interest.

The restructured rollover, just as many Nigerian companies with huge debts, involves negotiating the extension of the loans by one to three years and if lucky, reducing the interest rates. In return, the bank books new fees (which are often paid in advance of the restructuring) and then gets to avoid huge provisioning mandated by the central bank.

Access Bank is not new to slugging it out with debtors, particularly those who do not pay up. Upon takeover in 2019, Herbert Wigwe, the CEO of Access Bank announced that his bank was going to go after Diamond Bank debtors.

In an interview in 2019, he maintained, We recovered N2.2 billion bad debt in the year under review. Access Bank will intensify effort to ensure that it recovers the debt owed to Diamond Bank. We will go out for Diamond Bank’ debtors and if they are not ready to redeem their debt we will publish their names in the newspapers.”

Access Bank, in 2019, swooped on Japaul Plc seeking repayment of their Diamond Bank loans which was now about N37 billion. The bank took over Japaul’s trading assets and integral to the going concern status of the company.

Japaul was known to have made money rendering marine services, dredging, mining and construction mostly for the oil and gas companies, however, with business going bad, the company accumulated losses of over N50 billion as of 2018.

For the 5 years leading to 2018, the company reported losses with revenues going from N5.3 billion in 2015 to about N85.8 million in 2019. External loans had also ballooned from about N18.8 billion to about N38.8 billion. Its share price had also fallen to about 20 kobo per share by the end of 2019. It was nearing bankruptcy.

They began a court battle with Access Bank over the loans and the threat of a liquidation eventually settling for a deal.

Nairametrics reports that Access Bank, unlike Diamond Bank, is one of the most aggressive banks in the business when it comes to playing dirty with debtors and will take any legal means necessary to recover their loans even if their actions are viewed as uncanny.

Access Bank recently obtained a Mareva injunction sealing the offices and taking over the assets of Seplat due to a related party loan owed by the latter’s Chairman, ABC Orjiakor.

Just like Japaul, the loans owed by ABC Orjiakor were also obtained from Diamond Bank.

Eventually, Access Bank and Japaul agreed to settle the matter outside the court. In exchange for repaying the N38 billion loan, Access Bank settled for a repayment of N30.9 billion. The deal involves Access Bank taking over two of Japaul’ s Dredgers (12& 13) for N5 billion and a Barge (Beau Geste) for N25.9 billion. Japaul also gave up its land in exchange for working capital of N1.5 billion from the bank.

In return, Japaul gets to clean up its balance sheet erasing what is left of its debt, booking a profit of about N40 billion and wiping off its negative equity of N35.5 billion.

From negative equity of N35.5 billion, the company’s net assets are now N4.69 billion. A win-win for everyone.

While it is not clear what Access Bank plans to do with dredgers and barges it took over from Japaul, however, based on the deal, Japaul also gets to lease back the two dredgers for a period of 6 years from Access Bank for a sum of N1 billion paid annually from 2021 – 2026.

Japaul got a one-year moratorium on repayment expiring in December 2020.

Japaul has since changed its name to Japaul Gold and Ventures citing the dwindling oil and gas sector for its reasons.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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