What is the status of the Initial Consideration Bonds following the Issuance of Programme Bonds?
The Initial Consideration Bonds issued to the EFIs on December 31, 2010 are to be mandatorily swapped/ exchanged for the Programme Bonds. EFIs will exchange the ICBs with the Programme Bonds and return the ICBs to AMCON for cancellation. The newly issued Bonds will bear the same characteristics as the Consideration bonds (yield to maturity, tenor etc). The ICBs will be cancelled following this exchange.
Will the Programme Bonds pay interest to Bondholders?
Payment of interest to Bondholders will be as indicated in the relevant Pricing Supplement.
Will the Programme Bonds be Tax exempt?
It is expected that the Programme Bonds will enjoy the same tax treatment as Federal Government securities and so be tax neutral.
Are there any provisions for Seniority/ Subordination with respect to the Bonds to be issued?
The Bonds, when issued, shall rank pari passu among themselves in all respects without discrimination or any preference whatsoever
How does AMCON propose to redeem the Bonds at maturity?
AMCON will redeem bonds through funds obtained from its operations; capital gains,sales of assets, asset returns, recoveries, sale of loans, investments in Intervened Banks, along with proceeds from the sinking funds contributed to by all the banks and CBN.
Banks have signed an agreement to contribute 0.3% of their total assets to a sinking fund to assist AMCON with it’s resolution costs
Are the Bonds guaranteed?
The Bonds have been guaranteed in full by the Federal Government of Nigeria and will bear the full faith and credit of the FGN in accordance with the provisions of Section 26(I) and 27 of the AMCON Act, 2010 and Section 47 of the Fiscal Responsibility Act, 2007.
Can title to the Bonds be transferred prior to the maturity date?
The transfer of title to Bonds issued in registered form shall be made in accordance with the provisions of the Programme Trust Deed on registration of transfers, whilst transfer of bonds issued in uncertificated form shall be effected in accordance with the rules governing transfer of title in securities held by CSCS
How will the bonds be redeemed?
Subject to the terms of the applicable Pricing Supplement, each Bond will be redeemed by the Issuer on the maturity date at its final redemption amount (par value).
Will assets passed on to subsidiaries be considered as margin loans?
No. Classification of margin loans will be based solely on the standard definition of margin loans.
What is the background to the proposed Issuance Programme?
The Programme will be constituted by a Programme Trust Deed (“Trust Deed”) to be executed between the Asset Management Corporation of Nigeria (“AMCON”) and the Programme Trustee. Bondholders will be entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed.
How will the Programme be structured?
The Programme will be registered with the Securities Exchange Commission and listed on the Nigerian Stock Exchange, to ensure maximum tradability and liquidity and to promote the deepening of the capital market. The Programme Bonds will be issued in Series, with detailed terms and conditions for each Series specified by a Pricing Supplement with respect thereto.
What is the purpose of the Programme?
One of AMCON’s main objectives is to acquire eligible bank assets (EBAs) from eligible financial institutions (EFIs) towards assisting the EFIs to resume lending activities. Accordingly, AMCON issued Initial Consideration Bonds (ICBs) for a total value of c.N1.15trn on December 31, 2010; in exchange for EBAs. In order to ensure the full tradability of the bonds held by the EFIs, AMCON will, imminently, issue Series 1 Bonds in order to swap/ exchange the Initial Consideration Bonds (ICBs) with the Programme Bonds. In addition to this, the Programme will enable AMCON to acquire additional EBAs from the EFIs and provide financial accommodation to aid the restoration of Net Asset Value (“NAV”) to zero in the Intervened Banks. The Bonds will also raise working capital for AMCON.
What is the size of the proposed Debt Issuance Programme?
AMCON is issuing bonds in a programme with a limit of N3,000,000,000,000. AMCON’s immediate plan is to issue the Series 1 Bonds (by February 2011), with a total size of N1,500,000,000,000. The size of subsequent issuances will be as stipulated in the relevant Pricing Supplement.
How will the Issuance Programme be sequenced?
AMCON intends to complete the Series 1 Issuance (N1.5trn) in February 2011. Subsequent Issuances will be carried out as determined by the Corporation.
What is the minimum level of subscription to the Programme Bonds? In what Currency will the Bonds be denominated?
The minimum level of subscription for any eligible Bondholder will be as specified in the Pricing Supplement. The Programme Bonds will be denominated in Nigerian Naira or such other currency as specified in the applicable Pricing Supplement.
What groups of individuals/ institutions are eligible to subscribe to the Programme?
The Programme shall be open to EFIs, High Networth Individuals and Qualified Institutional Investors as defined by Section 78(C) of the SEC Rules and Regulations and the Investment and Securities Act No 29, 2007.
In what form will the Bonds be issued to Bondholders?
The Bonds may be issued in registered form, represented by Bond Certificates or in uncertificated form (e-allotment), registered with the Central Securities Clearing System (“CSCS”).
Can the instruments (bonds) used in exchange of Assets be subject of repos. And if so, can it be transferable i.e. sold.
Consideration Bonds can be repurchased through a special repo window opened for this purpose by the CBN, but cannot be sold.
What collateral will be accepted by AMCON?
Collateral accepted by AMCON will include a range of assets including; shares, real estate, plant and equipment etc. but for now this larger range of assets will only be for the affected banks, as only Margin Loan NPLs of the other banks will be purchased
Can banks transfer my non-performing loan to AMCON without my consent?
Yes, The AMCON act expressly permits this
After the sale of the NPL, will the banks still have any obligations in relation to the NPLs? Will the banks be paid for these obligations?
Banks may be engaged as servicing agent for a fee as noted above
Will there be any liability for wrong values ascribed to NPLs by the EFIs?
Yes – post sale adjustment or sale reversal
What are the sources of liquidity for the consideration bonds
The CBN will open a repo window for these bonds as follows:
- up to 25% of the Bonds may be repurchased up to the first anniversary of the Bond Issuance;
- a further 25% may be repurchased up to the second anniversary; and
- The balance 50% may be repurchased up to the third anniversary.
Can the initial bonds be traded?
No. But the Bonds that will be issued to swap these out will be tradable
How does AMCON value intangible collateral and judgment debt?
A judgment debt is an unsecured debt and will be purchased as such. As for other intangibles, methodology will be as guided by CBN Guidelines issued pursuant to AMCON Act.
Does AMCON recover loans? If so, how will it be done?
Yes, AMCON will employ the services of banks, loan recovery agents and lawyers who will seek to directly recover loans or restructure NPLs to guarantee settlement of these loans within the timeframe of its operations
Will AMCON service the NPLs on purchase or will it use a servicer?
Yes, AMCON will employ the services of the banks as loan service agents, for an agreed fee, on a limited servicing basis until AMCON is able or willing to take on the role.
Will the same valuation method be applied to both intervened banks and regular Banks?
Yes. - For margin loans AMCON will value non-performing loans (NPLs) backed by shares of listed companies at an implied premium of approximately 60% on the 60-day average of recent prices ending November 15th 2010. This applies to both intervened and regular banks. NPLs backed by other perfected collateral would be accepted at the most current estimate of the loan value supplied by the institution.
How will AMCON’s purchases of NPLs and recapitalization be funded.
AMCON’s purchases will be funded principally by the issuance of FGN guaranteed Bonds. Additionally, AMCON expects to derive additional income from sale of assets, asset returns, recoveries, sale of loans and the sinking fund contribution from CBN and the Banks.
How will valuation be done?
Each phase of the NPL purchases will be valued in a transparent and consultative manner to ensure fair pricing for all parties.
As a debtor , what happens when my loan gets transferred to AMCON?
AMCON steps into the shoes of the Bank as principal. Banks may continue to act as agent for AMCON in servicing and recovery
What is the timeline for acquiring NPLs? Will it be done all at the same time or phased.
AMCON seeks to finalize the acquisition of all NPLs by March 31, 2011.
What the classification is of loans not fully collaterised.
These are to be treated on a case by case basis. Generally speaking these will be treated as unsecured loans and purchased as such. However, where no action is required of the borrower to perfect the security the valuation may be different