General News of 2014-02-03

'Evidence' confirms E&P settlement of 28m Merbank debt

The New Crusading Guide newspaper says its "unimpeachable sources" at the Cairo-based African Export-Import Bank (Afrexim Bank), confirms Engineers & Planners Company Limited (E&P) has settled its outstanding indebtedness of $28 million to Merchant Bank.

The newspaper says evidence it has come across indicates E&P, owned by Ibrahim Mahama, who is a brother to President John Mahama, settled the debt on January 31, 2014.

"A Swift Advice sighted by this paper, a copy of which is published on page 2 of today's edition for the benefit of our readers and the general public, indicates that an amount of $28 million had been transferred by Afrexim Bank (Sender) to the off-shore account of Merchant Bank (Beneficiary) via Citi Bank N.A.,New York, N.Y. US. (Receiver)", the newspaper claims.

The loan taken by E&P, a logistics and engineering firm, became the subject of political attention, following the proposed sale of Merchant Bank to FirstRand of South Africa, largely because of his company's indebtedness.

The debt owed by E&P is said to constitute a chunk of the bad loans portfolio of Merchant Bank which has crippled the bank and necessitated its sale.

Editor-In-Chief of The New Crusading Guide, Abdul-Malik Kweku Baako Jnr, during a panel discussion on Multi TV and Joy Fm's flagship news analysis program, NEWSFILE, last December read a Utilisation Request from Engineers & Planners dated December 13, 2013 and signed by its Chief Executive Officer (CEO), Mr. Ibrahim Mahama, to the African Export-Import Bank.

The Utilisation Request stated, according Mr Baako Jnr, that E&P was seeking "to borrow a Tranche 1 Loan on the following terms: Proposed Utilisation Date: 20th December, 2013 (or, if not a Business Day, the next Business Day); Amount: $28,000,000 or if less the Available Facility; Interest Period: 48 months".

The same Utilisation Request, according to Mr Baako Jnr had directed that "the proceeds of this Tranche1 Loan should be credited to Merchant Bank Ghana Limited, Citi Bank N.A., 111 Wall Street, New York, ABA No. 021000089, Swift: CITIUS33, Account No. 36056153[Swift MBGHGHAC]. This Utilisation Request is irrevocable".

The New Crusading Guide asserts further that a close scrutiny of the details of the Swift Advice, shows that the transfer of $28m effected by Afrexim Bank was in strict accordance with the December 13, 2013 Utilisation Request issued by E&P except the non-fulfilment of the original proposed utilisation date of December 20, 2013 due to unforeseen circumstances.

The $28m transfer effected by Afrexim Bank in favour of Merchant Bank on behalf of E&P on 31st January 2014, was as a result of $72,000,000 Secured Mining Services Contract Financing Facility Agreement dated 14th November 2011, amended by an Amendment Letter dated 16th November 2011, and further amended by a Deed of Amendment dated 27th December 2013.

The latter reduced the loan facility from $72 million to $52 million.E&P efforts to secure the Afrexim loan facility have had a chequered history.

At the time the E&P was granted the Merchant Bank/Ghana Commercial Bank &37 million syndicated loan facility in 2007, the company also appointed Merchant Bank to source a Mining Service Facility of $60 million from an International Finance Institution.

After various due diligence audits were carried out Merchant Bank was appointed as the Local Administration Agent (LAA).

However, Merchant Bank withdrew from the Facility in October 2010 claiming “it would have been disastrous to the interests of Merchant Bank as an institution which was already distressed if that Agreement had been executed".

The Merchant Bank Board Committee on Engineers and Planners chaired by Mr. Seth Dei set out the Bank's reason for withdrawing from the facility in a letter dated 25th March 2011.

According to the newspaper, Merchant Bank Board of Directors stated in a September 24, 2012 response to the Secretary to the President J.E.A Mills, Mr. J.K. Bebaako-Mensah, that “after review of the Afrexim Facility Agreement, the Bank reached the conclusion that the Agreement as it stood was inimical to the interest of Merchant Bank. This was grounded on sound principles and reasoning. If Merchant Bank had signed the Agreement it would have worsened the plight of the Bank. It would have been in further breach of the Bank of Ghana 'Single Obligor Limit'. Simply put, why should a creditor guarantee (as first loss guarantor) a loan being sourced by its debtor with a poor repayment record? No responsible Board of Directors would sanction that".

The bank's Board of Director's report was in reaction to a petition by E&P to the National Security Advisor regarding Merchant Bank's withdrawal from the facility.

Engineers & Planners on their part, had accused Merchant Bank of engaging in "plain foot-dragging" and "deliberate sabotage" of the process to access the Afrexim Bank Loan Facility.

In 2011 Intercontinental Bank was formally appointed as the new Local Administrative Agent (LAA) for the Afrexim Bank Facility and the process to access the loan facility began anew, after Merchant Bank's withdrawal from the facility.

Intercontinental Bank then granted E & P a facility of $21 million in August 2010 to continue its operations. By June 2011, less than a year E & P had repaid that facility. "All the necessary due diligence exercises had to be carried out again. By the close of December 2011, almost all the conditions precedent (CPs) had been fulfilled awaiting draw down of US$72m, from which Merchant Bank would have been re-financed.

However, all of a sudden Access Bank acquired Intercontinental Bank and the process stalled again due to the change of name and owners of the previous LAA, Intercontinental Bank. The Board of Access had to give their approval once again.

That process took another period of not less than four months to get the approval from Access Bank Board", the paper revealed.

According to The New Crusading Guide, approval was finally given in September 2013 and the various stages of the due diligence once again had to be carried out. Fortunately, this time around it took a shorter period and by close of work November 19, 2013 most of the conditions precedent had been honoured and draw down had been assured by December 15, 2013 from which Merchant Bank was to be fully paid.

However, things didn’t go as anticipated leading to a review of re-payment schedules, timelines and deadlines relative to amendments proposed by some of the Original Lenders and their Financial and Legal Representatives.

Source: The New Crusading Guide
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