Time is wearing thin for indigenous oil exploration and production company, Shebah, whose latest appeal of a $143 million lawsuit brought against it by three creditor banks following a $150 million loan repayment default, was thrown out of a London court last year.
On July 1, 2011, Nigerian lenders- Diamond and Skye Banks, as well as Egypt-based Afrexim Bank lent US$100 million to Shebah under a pre-export finance facility agreement, a figure that was later amended to $150 million on May 11, 2012, with each bank advancing $50 million, according to a court document seen by BusinessDay.
The banks claim that since a US$6.1 million payment in June 2012, Shebah has made no further repayments.
This led the banks to file a lawsuit demanding the balance repayment by Shebah and the two guarantors of the loan, ABC Orjiakor, Shebah’s President and chairman of upstream oil and gas firm, SEPLAT; and Allenne Limited, one of Orjiakor’s trading companies.
Shebah made an unsuccessful appeal at the Royal Courts of Justice Strand, London on June 28 2017 to negotiate a lesser payment, as the court ruled that the entirety of the sums claimed by the claimants (the three creditor banks) are due and payable by the appellants (Shebah, Orjiakor and Allenne Ltd).
“The claimants have accelerated Shebah’s entire debt pursuant to Clause 24.17 of the Facility Agreement (such that it is immediately due and repayable), and have made demands on Allenne and Dr Orjiako under their respective guarantees,” the court document seen by BusinessDay read.
“The appellants sought to argue that the claimants could not rely on the acceleration or the demands. This argument was rejected by the judge, and has not been renewed,” the document read.
Shebah was not immediately available to say if other appeals have been made after then.
Diamond bank’s spokesperson, Mike Omeife, did not respond to a text message. Skye bank, whose board was dissolved in 2016 by the Central bank over weak capital adequacy ratios and ballooning bad loans, was also not immediately available for comment.
Two phone calls to Cairo-based Afrexim bank’s Abuja address at No. 2 Gnassingbe Eyadema Street, Asokoro, went unreplied as work hours had elapsed at the time the calls were made.
Nigerian companies have suffered since the 2014 oil-price crash triggered an economic contraction and sent corporate earnings plunging.
Last year, Etisalat Nigeria (now 9mobile) was taken over and later put on receivership by 13 creditor banks who had provided the telecommunication company a $1.2 billion loan in 2013, which the company defaulted on.
Rampant inflation reduced consumers’ purchasing power and the central bank’s tightening of capital controls led to a shortage of dollars, which companies need to pay for imported equipment and service foreign-currency loans.
The naira lost more than half its value against the United States dollar in that period, with companies having to deal with dollar loans that had doubled in naira terms. That saw non-performing bank loans spiral to more than double the limit set by the regulator.
Being an oil exploration and production company, Shebah was particularly hard hit by declining oil prices and militant attacks in the Niger-delta that nearly halved the country’s production to a decade-low of 1.2 million barrels daily.
The $150 million loan was to enable Shebah refinance some of its pre-existing debt; and provide it with working capital, including funding for an oil production programme at the Ukpokiti oil field in Nigeria, from which Shebah was entitled to 80 percent of the revenue.
LOLADE AKINMURELE
