CBN wields the big stick! Orders First Bank to divest all equity investments in Honeywell, Airtel within 90 days

Charles Abuede

More heat blows on First Bank after Nigeria’s Central Bank (CBN) directed the financial institution to recover the loans owed by Oba Otudeko’s Honeywell Flour Mills Plc to be paid immediately within 48 hours and also divest all equity investment in the company and in Bharti Airtel within 90 days. This is according to a memo seen by business a.m.

According to the memo signed by Haruna Mustafa, Director of Banking Supervision, at the Central Bank, the company is required to repay its full obligations to the bank within 48 hours and failure to do so will allow the CBN to take appropriate regulatory measures against the insider borrower and the bank.

“We are concerned that the bank has not complied with regulatory directives to divest its interest in Honey Well Flour Mills despite several reminders. We further noted that after 4 years, the bank is yet to perfect its lien on the shares of Oba Otudeko in FBN Holdco which collateralized the restructured credit facilities for Honey Well Flour Mills contrary to the conditions precedent for the restructuring of the company’s credit facility.

“Given the bank’s failure to perfect the pledge and satisfy a condition or regulatory approval, the restructuring has thus been invalidated and the credit facilities now payable immediately. Consequently, the company is required to fully repay its obligations to the bank with 48 hours failing which the bank will take appropriate regulatory measures against the insider borrower and the bank,” the memo reads.

This is coming after the reports that went rife in the media media on Wednesday where First Bank announced the appointment of Gbenga Shobo as its Managing Director/Chief Executive Officer (CEO) and following the news that the former MD/CEO, Dr Adesola Adeduntan, had retired. The purported change in management without regulatory approval by the apex bank has led to the transition process being flagged down by the CBN who said the appointment has no justification because Adeduntan’s tenure was yet to run out, and there was no notification from First Bank to the CBN over the transition.

Reacting to the news, the CBN said, “The attention of the Central Bank of Nigeria (CBN) has been drawn to media reports that the Board of Directors has approved the removal of the current Managing Director of the bank, Sola Adeduntan, and appointed a successor to replace him. The CBN notes with concern that the action was taken without due consultation with the regulatory authorities, especially given the systemic importance of First Bank Limited.”

According to a report in 2017 by Secret Reporters, the loan facility was in the region of N75 billion and was non-performing before a recent restructuring. It is however, of a regulatory concern by the CBN that First Bank has not performed due diligence in the collateralization of the credit facility which further shows that there was no binding document filed with the apex bank that will allow it to claim the collateral legally should there be any default in the facility.

Elsewhere, there exists a long winding issue over the transfer of assets (Honeywell and Airtel) which were allegedly pledged to Ecobank, to First Bank who stands in the equity position of ownership while Ecobank has a debt position on the assets. According to news reports, a N5.5 billion loan facility given to Oba Otudeko’s Honeywell Flour Mills by Ecobank in 2013, has turned out to be the subject of legal process and is in fact still ongoing at the Supreme Court. Thus, the central bank has ordered for divestment in the equities of Honeywell Flour Mills and Bharti Airtel Nigeria Limited within 90 days.

“Furthermore, the Bank notes the untenable delay in resolving the long outstanding divestment from Bharti Airtel Nigeria Limited in line with extant regulations of the CBN. Accordingly, you are required to divest the equity investments in all non-permissible entities such as Honeywell Flour Mills and Bharti Airtel Nigeria limited within 90 days. Please, you are to forward evidence of compliance in accordance with the timelines above to the director of banking Supervision,” the memo from CBN reads.