AMCON vs Arik case: Lest we forget the facts of the matter

In as much as the current executive management of the Asset Management Corporation of Nigeria (“AMCON” or “Corporation) has taken a position not to resolve the differences with obligors on the pages of newspapers, allowing lies to fester regarding the position of AMCON as far as the indebtedness of Sir Johnson Arumemi-Ikide and Arik Air (“in receivership”) are concerned will not do the image of our nation and indeed the aviation sector any good.

Ever since the current administration, led by President Bola Ahmed Tinubu GCFR, assumed office, AMCON has observed from the sidelines the desperate approach of some obligors, especially the promoters of Arik Air, led by Sir Johnson Arumemi-Ikide. They have continued to employ and deploy all manners of skewed narratives to malign the management of AMCON, including its past and present management. These narratives have been consistent in trying to portray Sir Johnson Arumemi-Ikide as a saintly businessman.

Even though Sir Johnson Arumemi-Ikide had through his lawyers (Femi Falana) sent a petition to the Economic and Financial Crimes Commission (EFCC), mentioning the former managing director/CEO of AMCON, Ahmed Kuru; Kamilu Omokide (Former Receiver Manager Arik); Captain Roy Ilegbodu CEO- Arik in Receivership, Super Bravo Limited, and Union Bank Plc, and the case currently in court, they have continued to motivate some armchair analysts and hatchet writers that have continued to spew lies and misinform the public.

It is therefore important to note that AMCON intervened in Arik on the order of the then-Federal Government of Nigeria led by President Muhammadu Buhari GCFR. While it is not the focus of AMCON to engage in needless media squabbles, as several of the issues that are bandied around by these flight-by-night writers are sub judice, considering factual inaccuracies, AMCON considers itself duty-bound, as a public institution, to correct certain inaccurate facts alleged by Sir Johnson and put forward the proper state of play to the general public.

It is not in doubt that Arik owes AMCON over N250 billion. This is besides bank and trade credit to third parties in the region of nearly N100 billion. Although some of these hired writers have claimed that Arik had about 30 planes, the fact is that at the commencement of the receivership in 2017, only eight of Arik’s aircraft were operational, most of which were nearly due for engine and landing gear overhaul. There were, however, no maintenance cash reserves to pay for these major overhauls as is the best practice.

This capital shortfall of Arik had been an ongoing issue even before the receivership, as Arik’s erstwhile management could only fund engine overhauls through loans obtained from creditors such as financial institutions, or by deferring payments to federal aviation agencies, FIRS, Lufthansa, overflight, and navigation agencies of various countries, MROs, parts sellers, staff (whose salaries were not paid and pension deductions not remitted), pilot training schools, ground handlers, fuelers, etc. This is an advanced form of spontaneous financing. It was offensive to creditors, which was not professionally sustainable.

In good faith due to limited working capital, AMCON approved the receiver/manager’s plan to sell some non-operational planes pledged to AMCON and reinvest the proceeds into Arik. However, Sir Johnson truncated this plan by frivolous court actions. Thus, the optimisation of redundant fixed assets to refinance the operations of Arik was stultified by Sir Johnson’s legal machinations and unwillingness to have constructive engagement.

In addition, approximately $34 million is currently held by Boeing on Arik’s behalf. Attempts were made by the receivership to partly release the funds to fix planes and inject capital back into the airline. Boeing (aircraft manufacturers) were eager to see their planes fly and were willing to support Arik. However, Sir Johnson contacted Boeing, advising against disbursing the funds, and threatened legal action if Boeing did.

It is also on record that a forensic review was conducted by the firm of KPMG. The full audits of the 2015 and 2016 pre-receivership evaluations were conducted and the poor state of Arik was established that Arik was chronically insolvent. It was based on these facts and the fact that the federal government mandated AMCON to intervene in Arik to ensure that the airline did not die because at the time it played a pivotal role in the aviation sector of Nigeria. The fact that Sir Johnson Arumemi-Ikide will deny the loan with Union Bank of Nigeria is, to say the least shocking. It is a fact that they signed an agreement with AMCON on how to repay the loan, and all of a sudden, the same individual goes to the EFCC, a sister government agency, to deny knowledge of such a loan. It leaves a lot to be desired.

It is also on record that Arik got huge concessions of approximately $100 million from an exposure of about $550 million to address whatever concerns they had about excess charges, among others from banks, yet they failed to pay.

Under Arumemi-Ikide’s leadership of Arik, the airline had a poor aircraft acquisition strategy. Arik lacked a clear strategy for managing its huge FX risks and could not deal with the slowdown in the Nigerian economy. After making mistakes, they lacked the courage to sell the wrong planes and cut losses. Frozen and jaded amid the crisis, it was safe to say the business was too complex for its owners.

Today, as much as he is trying very hard to disparage AMCON, it is important to remind Nigerians that after achieving the stabilisation objectives and the recognition of the private sector as the engine of growth, negotiations were opened with the shareholders of Arik in the last quarter of 2017 to the first quarter of 2018 to return the company. It is interesting to note that at this point, Sir Johnson Arumemi-Ikide was grateful to AMCON and the receivership team for keeping the company afloat.

They also agreed to pay ₦65billion to AMCON and pay off other banks. This was over 50% concession. To support his claim of ability to pay the concession sums, Sir Johnson Arumemi-Ikhide brought a letter purportedly from CitiBank Hong Kong Reference CITIBANK/HK-5B/1417 issued in favour of AMCON. It was claimed they had funds to the value of $5 billion. Quite unfortunately, upon careful verification from CitiBank, the proof of fund letter was defective. The settlement failed due to non-performance. Again in 2019 and 2022, Sir Johnson Arumemi-Ikide approached AMCON with proposals to pay a fraction of the sums due with speculative repayment sources. AMCON could not support the proposals because of previous antecedents.

Let Nigerians also be reminded that the receiver manager engaged PwC Nigeria, Arik’s longstanding auditors (previously appointed by Sir Johnson Arumemi-Ikhide), to conduct statutory audits of the 2015 and 2016 accounting years. It was established incontrovertibly that Arik had been technically insolvent since 2014. In fact, as of the end of December 2016, Arik’s insolvency had reached a negative shareholder capital of ₦139 billion – what this meant at that time was that Arik was effectively bankrupt.

It is important to mention that against the strenuous attempts to create the impression of incompetence in the media, Arik in receivership has, at all times, been led by best-in-class professionals. The chief executive officer, Capt. Roy Ilegbodu, is a seasoned aviator with decades of experience in airline operations, executive management, and regulation. He was supported by senior management officers from within Arik and outside Arik. To strengthen governance, a technical advisory committee was empanelled, led by Dr. Harold Demuren, former DG of NCAA. They exercised control over the operations of the airline, while the receiver managers provided legal authority, oversight, and support.

The facts of the matter lest we forget, is dragging the name of the former managing director/CEO of AMCON Ahmed Kuru, Kamilu Omokide (Former Receiver Manager Arik); Captain Roy Ilegbodu CEO- Arik in Receivership, Super Bravo Limited, as well as Union Bank Plc, is part of the extended plot by the promoters of Arik to create a distraction on the real issue, which is the fact of their huge indebtedness and the embarrassment they caused Nigeria globally. It was based on that that the former administration mandated AMCON to intervene in the airline.

Again, the current management of AMCON led by Gbenga Alade has continuously assured Nigerians that different resolution options are being considered on Arik and other obligors, including settlement proposals from the shareholders where it is practical and reasonable. No doubt the debt recovery process is arduous. Nevertheless, the general public is assured that while the process may take time, the recovery of public funds which remains the mandate of AMCON will continue, and no amount of blackmail and media campaign by the obligors will stop AMCON from carrying out its mandate. Nothing more, nothing less.

Jude Nwauzor is head of corporate communications department at AMCON