Business News of 2013-12-11

Merchant Bank Mafia Unmasked

By Larry Dogbey

The Herald’s investigations into the brouhaha between Merchant Bank and its debacle with contractors and equipment rental company, Engineers & Planners (E&P) owned by the 42-year old, Ibrahim Mahama, younger brother of President John Dramani Mahama, have unearthed some very revealing findings.

Deeply-rooted in this controversy is interparty politics, personal egos, lack of patriotism and above all self interest on the part of Ghanaian politicians on both side of the political divide in the ruling National Democratic Congress (NDC) and New Patriotic Party (NPP).

Some of The Herald’s findings, made from intercepted documents, points to selfish interests of some individuals, within the ruling NDC, who were very powerful in the government of Late President, John Atta-Mills. Their aim is to have the state-owned Merchant Bank, sold out to their preferred buyer.

Their plot is simple, have E&P liquidated for non-payment of its debts and use it as justification to sell the state bank.

From the countless documents, E&P appears to be a pawn in a chess game of these powerful individuals carefully being orchestrated to sell the bank at a knocked down price. Leading this agenda has been, the ex-Board Chairperson of Merchant Bank, Mrs. Marian Barnor, who had her powers from the then Chief of Staff, Henry Martey Newman.

Prior to this, E&P had had its share of frustrations under the Kufuor government days after the then Member of Parliament (MP) for Bole-Bamboi, was announced as the NDC Vice-Presidential candidate, with Ibrahim Mahama reported to have donated some pickup vehicles to the then opposition NDC party to support the Mills campaign.

Ex-Minister of State at the Ministry of Finance, Anthony Akoto Osei and the Managing Director (MD) of Tema Oil Refinery (TOR), Dr. K.K Sarpong, two very powerful government appointees on the Merchant Board, are reported to have pushed for a change in the payment period, shorting it by 24 months to distress E&P.

On the side of the NDC, the individuals working against E&P, had played various roles in the eventual sale of two state-owned banks; Social Security Bank (SSB) to the French bank, Societe Generale and The Trust Bank (TTB) to Ecobank Transnational Incorporated.

Interestingly, Social Security and National Insurance Trust (SSNIT), had majority shares in both SSB and TTB prior to the sale. Coincidentally, the same SSNIT holds majority shares in Merchant Bank, which under President Mills was almost sold to the First Rand of South Africa.

The Herald, is in the meantime investigating claims that one of Mrs. Marian Barnor’s children, works for First Rand through a South African called Toad Capital, a financial service company with specialties in Corporate Finance, Merger and Acquisitions.

TTB was sold by SSNIT under the chairmanship of ex-Finance Minister, Kwame Peprah, and the discussion towards the sale of Merchant Bank to First Rand Bank of South Africa, also started under the same, Mr. Peprah.

From documents available to The Herald dating as far back as November 2, 2007, it is clear that E&P was at all times either paying the loans or making arrangement towards having the full amount settled in one off payment, but the company was frustrated by the Board of Directors and management of Merchant Bank.

For instance, in a March 25, 2011 document available to The Herald titled “Re: USD60,000,000 Afreximbank Mining Services Contract Financing Facility In Favour Of Engineers And Planners Company Limited” one Seth Dei, an employee of Merchant Bank and chairman of a Board Committee on E&P wrote cancelling a US$60 million loan facility the company wanted.

E&P, wanted to use that loan from an Egypt-based international bank to defray the loan owed Merchant Bank, however, the Board Chairperson, Mrs. Marian Barnor, drove out officials of the company, because Mr. Ibrahim Mahama, failed to attend a meeting which was to decide on the loan.

Shockingly, officials of E&P, including Sulemana Ahmed Amidu, Chief Finance Officer (CFO) and Kwadwo Aboagye-Atta Finance Director, officials of Renaissance Africa Group, transaction advisers to the company, as well as, his lawyers, Lithur Brew and Company were present to answer all queries.

What is even more revealing is that, Sulemana Ahmed Amidu, and Kwadwo Aboagye-Atta at various times have dealt with Merchant Bank for and on behalf of Mr. Ibrahim Mahama.

What is shocking is that Merchant Bank claims that E&P owes 30 per cent out of the 50 per cent toxic debt and all E&P was doing through Exim bank was to enable them service the loan.

E&P, which has the respected Dr. Joyce Aryee as its Board Chairperson, had wanted Merchant Bank to only act as its local agents for the lenders, Africa Export Import Bank headquartered in Cairo and play the role of “First Loss Guarantors” but this did not materialize due to an individual’s egos.

Another document in the custody of The Herald dated August 10, 2011, confirms that the loan at the time of negotiating for the US$ 60 million from the Afreximbank was US$28 million. It has now shot up to over US$38 million.

An August 27, 2013 document show that Access Bank, a Nigerian bank has taken the role of Merchant Bank to get the US$60 million to help settled the state-owned bank, which had willingly gone into the transaction with E&P, including paying off a loan owed Barclays Bank, so as to take full control of cash flows coming from a respected mining company like Goldfields.

The Access Bank document address to the African Export Import Bank was signed by Dolapo Ogundimu and Kameel Kajogbade Adebayo, both directors of the Nigerian Bank. This means that monies which would have come to the state-owned Merchant Bank, is going to a foreign bank.

The Herald is informed that some bad was situation created by Merchant Bank that at family level, then Vice-President John Mahama for nearly a year would not speak or meet with his younger brother, Ibrahim Mahama because he had become an avenue for his political opponents within and outside the NDC to get at him with claims that he was helping collapsing a state bank.

Other facts are that in August 2007, Ghana Commercial Banks (GCB) and Merchant Bank granted a loan facility of US$37, million to E&P. This facility had tenure of 60 months inclusive of a moratorium period of 6 months. Thus the span is therefore, August 2007 to June 2012 with a monthly repayment of principal plus interest worked out to US$ 750,000.

Loan repayment commenced in February 2008 and payments were honoured, but in October 2008, for some unknown reasons the Board of Merchant Bank changed the 60 months tenure to 36 months tenure. This was unilaterally done without consulting the joint Finance Partner, GCB.

The monthly repayment then changed from US$ 750,000 to US$ 2,250,000 per month. The reschedule repayment plan created serious cash flow burden as nothing was left after debt service to support operations and maintenance costs of the construction and equipment rental company which has employed a number of expatriates.

At the time the facility was granted in August 2007, E&P also appointed Merchant Bank to source a Mining Service Facility of US$ 60 Million from an International Finance Institution. Various due diligence audits were carried out with Merchant Bank appointed as the Local Administration Agent (LAA).

In October 2010, when all the process were completed pending draw down, Merchant Bank frustrated the deal by declining to act as LAA and this stalled the whole process.

By mid 2011, a new LAA had to be appointed, and E&P had to look for another Financial Institution; hence Intercontinental Bank, a Nigerian Bank to start the process all over again.

Intercontinental bank granted E&P a facility of US$ 21 Million in August 2010 to continue its operations. By June 2011, less than a year E & P had repaid this facility. Intercontinental Bank took up the role as LAA and continued the process.

All the necessary due diligence exercises had to be carried out again, and by the close of December 2011, almost all the condition Precedent (CPs) had been fulfilled awaiting draw down of the US$72 million, from which Merchant will be re-financed. The facility was oversubscribed due to the record time of full repayment, of the facility before the maturity date.

All of a sudden Access Bank acquired Intercontinental Bank and the process once again stalled due to the change of name and owners of the previous LAA Intercontinental Bank.

The Board of Access Bank had to give their approval once again. This took another period of not less than four months to get the approval from Access Bank Board.

Approval was finally given in September 2013 and the various stages of the due diligence once again had to be carried out. This time around, it took a shorter period and by close of work November 19, 2013, all the condition precedents had been honoured and draw down had been assured by December 15, 2013 of which Merchant Bank will be fully paid.