Arik Air in talks with Dubai based investor to settle N375bn local, foreign debts

Four months after it was taken over by Assets Management Company of Nigeria (AMCON), over huge debt amounting to N375 billion,
shareholders of Arik Air may have started discussions with a major investor to partner with the airline in a move to offset the debts it owed both local and international creditors.

Businessamlive.com learnt from sources close to the talks that shareholders of the airline, after series of discussions with a number of potential suitor-investors, have now reached a firm arrangement with a Middle East-based conglomerate, with headquarters in Dubai, and which is keen to do business in Africa.

The board of the Dubai conglomerate is said to have set aside a war-chest of funds for investments in investment in airline business, power and agriculture. The Arik attraction is believed to be the platform it offers for immediate entry into air transport business in Africa without having to start from scratch, aided by the fact that Arik’s present situation offers a not-to-competitive entry-price for its funds.

“Arik Air and the company started negotiations last week in London and have reached some commitments and a team has been selected by each company to continue with the negotiations, which continues this month,” according to different sources who spoke on the negotiation.

“The plank of discussion is on the shareholding and the depth of the debts, which creditors must back with evidence, and also operational conditions,” one source told Businessamlive.com

Sir Joseph Arumemi-Ikhide, chairman of Arik Air, who confirming the development in a telephone interview, said the investor has started negotiation with the shareholders of the company and so far both parties had had fruitful discussions but that negotiations are continuing.

There are indications also that concerned government officials are aware of the meeting between Arik and the potential investor.

Sources disclosed that the company is willing to build maintenance,repair and overhaul (MRO) facility in Nigeria if government
gives it the needed support as it has serious plans to invest in air transport operations in Africa.

“We have been having discussions with investors and 10 days ago we had discussion with a US-based company, but we are having serious discussion now with this organisation which is based in the Middle East because they have a package to invest in Africa and take advantage of the growing economy in the region. We have reached agreement on what I will call the sub-heads but the details will come out in our next discussion, but so far the discussion has been fruitful.

“They are interested in expanding our operations and will give us additional airplanes in addition to the six we ordered from Boeing; so we have to expand our operations throughout Africa and other international destinations with their partnership. They are eager to invest in Nigeria but, of course, with the support of the Nigerian government and they said that government support is crucial because you cannot really succeed in airline business without government’s support and that is necessary for them to invest in Nigeria or they will take their funds to another African country,” Arumemi-Ikhide said.

Arik’s shareholders are now putting up a strong team that would include, Deloitte UK, Barclays Africa and a UK-based law firm, for the next round of discussion, another source disclussed.

AMCON had said that Arik Air owed it N263.7 billion, but the airline had argued that its total debt exposure, including that of international creditors and local debts amounted to N160 billion, which represents a 16.4 percent of its value put at $3.2 billion by Deloitte UK in 2013.

In April this year, Oluseye Opasanya, the receiver manager of the airline, listed some other debts owed by Arik Air to include Insurance Policy (N418. 89 million), National Pension Commission (N4. 59 billion) and debts to both Zenith and Access Banks (N28.347 billion).

He said it also included Amadeus Marketing Nigeria (N632. 49 million),
Marriot and Best Western Hotels (N3. 8 million), undocumented bank loan
(N2 billion) and the Federal Airports Authority of Nigeria (N11. 21
billion).

Others are Export Development Canada ($53.43 million), Sky Enterprises LLC ($30 million), FAAN ($942.14 million ) World Fuel Services Inc ($26.55 million) and loan from Prince Arthur Ezenwa ($2.5 million).

Opasanya said the airline owed the United States Internal Revenue Service and the United States Customs $987,170 and $311,888
respectively.

According to him, Arik Air, under the erstwhile management, also owed N100.36 million to Heathrow Airport and N121. 45 million to Her Majesty’s Revenue and Customs.

It is however expected that the new investor, who would take major shares in the company, would offset Arik debts and provide it with operational funds once modalities are worked out.