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AMCON bonds won’t need Fed Govt’s guarantee, says MD

By on April 7, 2011

With the expected recovery from debtors and the sinking fund to be contributed by banks and the Central Bank of Nigeria (CBN), the Asset Management Corporation of Nigeria (AMCON), would not need the Federal Government’s guarantee for its bonds, Managing Director of the corporation, Mustapha Chike-Obi, has said.

The banking industry had last year unanimously resolved to commit 0.3 per cent of the value of their individual balance sheets to AMCON for the next 10 years effective from last December, to enable the institution to meet any shortfalls in its activities.

The money is expected to be pooled into a Sinking Fund, which is to be invested in Zero Coupon Bonds as parts of efforts to accumulate funds to allow AMCON meet its obligation to the ailing banks, which are expected to resume lending.

Also, as part of its own contribution to the overall pool of what the banks have decided to financially task themselves, the Nigeria Deposit Insurance Corporation (NDIC) is looking at how to reduce the premium, which the banking industry currently pay to it.

AMCON, known as bad bank in banking parlance, has bought N2.04 trillion of bad debts and non-performing loans in two phases, out of the N3.3trillion toxic assets of banks. The last purchase was on March 31.

Speaking with The Nation yesterday, the AMCON boss, said the N30billion bonds offered to investors was oversubscribed by 221per cent.

He said the bonds are the only portion of the first part of a two-phase debt-raising plan that is open to the public for price discovery, stressing that they are safe instruments, which investors need not worry about.

The corporation he said, could only take N21billion out of the N60billion investors offered at a yield of 11.8 per cent.This transaction was part of a N3trillion debt-raising plan.

The banking watchdog had in 2009 removed eight bank chief executives and bailed out the industry with N620 billion following a debt crisis triggered by defaults on loans to buy shares.

The demand for the notes were said to have exceeded supply, 69 per cent of bids were within the guided yield range of 10.8 per cent to 11.8 percent.

The AMCON boss had said the corporation sold N1.04 billion of the consideration bonds, which aren’t tradable, on December 31 to start its debt- purchase plan. He said AMCON issued this kind of debt as it didn’t have enough time to complete the registration process by December 31.

Last Monday at the end of the Bankers’Committee meeting, the banking watchdog said it was targeting a non-performing loan ratio of five per cent across the banking sector after the AMCON absorbed banks’ existing bad loans.

AMCON had announced last week it had cleared all bad bank loans and was on track to recapitalise lenders rescued in a $4 billion bailout 18 months ago by the end of the second quarter.

source : The Nation