In this interview with Bukola Idowu, the managing director, Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, dismisses the notion that businesses taken over by AMCON are usually run aground. He said most of the businesses were already in pathetic situation before the intervention of the asset management company.
here has been this impression that any business taken over BY AMCON never survives, how true is this?
First of all, most of the businesses that were brought to AMCON were either in the intensive care, wheelchair or inside the casket.The first issue is that for them to be in AMCON means there is a problem. Financial institutions primarily have responsibility to give loans and if you go through financial account of the banks, you’ll find that more than 65 per cent of incomes of all the banks are from interest tariffs, which means giving of loans is very important to the financial institutions. All the facilities they transferred to AMCON, 80 per cent of them were already inside the casket only that they refused to open it for people to see what exactly was inside.
The only thing that supports them is the supporting assets and that is what we speak for, not for the business as a going concern. Let us not forget the fact that AMCON has not been set up to manage any business because we don’t have the capacity and that is not our mandate. We are more of a resolution company, we take over the assets and we sell those assets to recover our monies and in the process of selling those assets, we look for people that understand that business or people that are interested in the asset. What AMCON did at the beginning was to look at some of those businesses that were in intensive care and ask of what to do to support them. We had a restructuring arrangement with the businesses including further injection of fund into them. Yet, the businesses didn’t grow; most of them, unknown to us had cancer when we thought they had malaria. Ultimately, some of them had passed the stage of redemption.
What happened in the case of Aero Contractors?
By the time AMCON entered into Aero contractors, their outstanding obligation was more than N40 billion. Now tell me, with N40 billion, if you have to pay the interest of N40 billion, what is the return or earnings of an airline that was struggling that can survive under that environment. AMCON sat down with the legacy holders and said why don’t we convert some of the debts to equity but we still leave them with the opportunity to provide the managing director so they can still manage the airline because AMCON is not in the business of managing businesses. The airline had about 10 aircrafts; it has reduced to around two to three. An airline with three aircrafts has staff strength of about 1,600; it became impossible for it to make profit. The issue with excess staff is not only limited to payments, having people that are not working can also drag down a business. AMCON had put in additional money into that airline to see how we could support the airline but unfortunately it didn’t work, because the template in the beginning was faulty.
However, because we are interested in corporate governance we provided the chairman but they provided the managing director. That was the state we found the airline when we were appointed last year. The beginning has been faulty because there’s this perception that when you take something to AMCON, from day one it would start operating. Something that had been redundant for five years, 10 or 15 years in the financial institutions despite all the strength, staff and capacity that they have. So, I don’t believe that AMCON goes into any business to kill it, and I want to reiterate that AMCON has never pretended that they are in the business of running any business, we are only a 300-400 staff company, how many businesses can we run? In the last five years, I don’t believe AMCON has delved into a business to kill it, I believe the diagnosis of those companies were faulty.
In recent times, you have been to court and taken possessions of some properties, has AMCON gained traction in its debt recovery goal with these actions?
Yes, we have gained a lot of traction in the last couple of months based on the things that we are doing. There are two ways to go about recovery. One is you sit down with the debtor and they pay you the cash, or if they don’t have the cash, they give you the assets because you took the facility against some assets. So what we are saying is that if you say you don’t have cash to give or you don’t have business to run that can enable you to pay, give us the assets that is what is supporting the money that was given to you. But to take the assets unfortunately you have to go to court, and look for possession order, you have to appoint receiver manager, and it is not something you do with a letter and then you go and seal the place.
AMCON does not have the power to seal any place, we only do it when the court gives us the power. It is only when all our recovery efforts have failed that we go to court and say all our efforts on this matter has failed and we need to acquire these assets so that we can sell. In terms of assets forfeiture, it has increased by more than 200 per cent. There are quite a number of people that just want to get rid of the problem. But why you may not see a lot of cash payment is because we are not selling these properties. If we sell them today, we may not get the value. We have asked people to value buildings for us, they will value it N500 million and the same people when we tell them to sell it will say the economy is bad and offer N200 million. So we are not selling quite a lot of these properties but subsequently when the economy picks up we will be able to get value for those properties because if we sell them now, people will start saying you collected something at N500 million and you are selling it at N200 million but that is what we are seeing in the market. So directly we are seeing quite a lot of traction, and quite a lot of people are talking to us of which people do not hear about but it is very difficult because there is no cash.
Is taking a loan then a crime?
To borrow money from the bank is not a crime and it is not a problem but the only time it becomes a crime is when you refuse to honor your obligation. For us, we are looking at the commercial side-how do we encourage people to honor their obligations. In the resolution process, going to court is always the last option.
What is the relationship between AMCON and the presidential committee?
We are a law abiding organization just like the committee. What we try to do is to see how to leverage on the support of other agencies to support AMCON. For example, if someone has taken oil and gas loan and he has not paid and maybe he has a subsidy claim of N5 billion or N10 billion, unless there is any arrangement with the government, we will not be able to track that money. Our law allows us to track money anywhere and claim it, so for us to be able to do that there must be harmony between us and all those agencies, whether it is Debt Management Office, DMO or Petroleum Products Pricing Regulatory Agency, PPPRA. So the committee is not like the kind that will go and issue statement, it is a committee that is to help AMCON in the recovery efforts and I think it is a good initiative to reach out. The Minister Of Justice And Attorney General has been very good to us. As I said, we are going to court and we need the support of the judiciary, we are not looking for any favour per se, we just want quick dispensation of justice so that the process is accelerated. We know that quite a lot of people want to go to court because they hope it would take like 15 to 20 years to get judgment. People go to court not because they are right but because they believe it will give them time.
AMCON’s 2015 financial report shows a loss, can you elaborate on this?
On the 2015 account, the loss situation of AMCON will continue to reduce over time; it has a 10-year period. Now, loss is unavoidable. When we bought these facilities in 2010, 2011, there were interest elements on these facilities, the obligors were made to pay interest, which in itself from the beginning was faulty, because the banks that have sold these facilities to us had already provided for them, they are not even charging interests on them because the businesses were dead, but they transferred the business to AMCON.
AMCON is not a profit making organization, it is a resolution company. We get money from the sinking fund in the average of N160 billion every year, our estimation is that the contribution of the sinking fund as the banking industry is growing will continue to improve. Initially they are to contribute 31 per cent but now based on what is happening, they are going to contribute around 60 per cent of AMCON liability which stands around N5.1 trillion today. The most important thing for AMCON is its ability at the end of its period to discharge its obligations and I think AMCON will be able to do that. We have about four countries that adopted this concept. In these countries it is not making profit because the whole essence is to pay the obligations and once you pay the obligations, the whole process is finished. Even if we make profit today, it goes to the settlement of bond. So whether we pay it from profit or sale of assets, what is important is that at the end of the period, I should be able to pay all my obligations so that AMCON can wind down. We don’t have any problem as for AMCON winding down because even if we sell all our assets today as they are, what will happen is that we just take a unit in CBN where they will match whatever they make off the banks against outstanding book balance and this is the only country in the world that has that framework and this is something that is commendable and one should appreciate the banking industry for it.
I don’t think we are going to make profit in the nearest future but if you look at our financial statement, on AMCON stand alone, the losses went down, from N344 billion last year, it came down to N310 billion. Losses will continue to go down from the AMCON stand-alone financial statement.
What is the current status of AMCON now?
We have so far collected cash and asset to about N644 billion and we have settled 56 per cent of the total amount of N3.7 billion but settled does not mean money in the pocket. It means that on the record, we have settled. The challenge is from the beginning because the framework is a bit faulty, you can’t say you are taking somebody’s liability and this person’s business has totally failed to the commercial banks and give the banks liquidity. Meanwhile, it is a factory in Agbara that has been closed down for more than 10 years, you have paid for it because there had been a valuation of the value of the factory and you have paid the bank. And from day one that you collected the factory, you started charging interest on that loan, that is a problem on its own because you are charging interest on a facility or business that is already dead and then you are calling the person to come and sit down and have a discussion around it. So as he is struggling to talk to you, interest is increasing on the facility.
In your view what crucial thing should we addressed?
As a nation, we must address the governance issue. If we don’t build institutions, if we don’t support governance structures and if we don’t remove impunity, and we bring anyone from Wall Street or World Bank or London Stock Exchange, they will fail, because there is no institution to support what they want to do. We have visions, vision 2010, vision 2020, and if you look at those documents, they are thorough and excellent documents but there is no institution to support it. And I think that is why we must support government to build institutions because if we do not have institutions to execute and support those policies, we will continue to talk about the same thing. So we all have to be patriotic, we have to look at things positively and see how do we support the economy. The potentials here are huge. The kinds of process that we go through, the time that it takes, the efforts that we put, in other parts of the world they don’t put 10 per cent of that because they have structures to do all those things. So we must build institutions and governance is the first thing.