Akoto Osei & Cited In Merchant Bank Colllapse

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The Herald’s investigations into the controversy surrounding the sale of Merchant Bank and its loan to contractor and equipment rental company, Engineers & Planners (E&P), owned by the 42-year old, Ibrahim Mahama, junior brother of President John Dramani Mahama, have unearthed the October 6, 2008 politically motivated decision to change the loan payment duration from five years to three years.

Again, contrary to the media reports culled from memos of the Board of Directors of Merchant Bank, that E&P had refused to settle its indebtedness and this was collapsing the bank, The Herald’s investigation rather revealed that the company was dutifully honouring its obligations with the state-owned bank.

Indeed, plans had even been made to settle the loan in a one off payment, but officials of the bank frustrated that effort, and reports are that elements of the board especially, it’s immediate Chairperson, Mrs. Marian Rosamond Barnor, have been found to have had personal interest in selling the bank to a South African bank, FirstRand.

The October 6, 2008 letter signed by one Paul Baah-Sackey, Acting Managing Director (MD) of Merchant Bank addressed to Mr. Ibrahim Mahama, revealed how the then Board of Directors of the bank appointed by Kufuor government at its meeting Friday, September 26, 2008 unilaterally decided to vary the terms of the loan.

In the letter, the Board strangely cut the durations of repayment from 5 years to 3 years, obviously inconveniencing E&P, which had by then commenced the repayment of the US$38 million loan facility at a monthly rate of US$ 750,000.

The Board, which took the decision included, Dr. Anthony Akoto-Osei, ex-Ghana Bar Association President, Lawyer Kwame S. Tetteh who was the Board Chairman, Paul Baah-Sackey, Dr. Kwame Osei Owusu, Sam A.K. Acquaye, Kofi Issiw Andah, Franklin O. Asafo-Adjei, Mrs. Elizabeth Villars and Nana Fredua Agyeman Pambuo I.

Company insiders told The Herald that the decision was taken six weeks after the presidential candidate of the then opposition National Democratic Congress (NDC), Prof. John Atta Mills, nominated John Mahama, as his running mate for the December 2008 Presidential Elections.

The October 6, 2008 five-point letter sent to Mr. Ibrahim Mahama said, “the Board of Directors, at a meeting held on Friday, September 26, 2008 agreed on the following:- Repayment of your outstanding facility should be expedited and therefore should change from five to three years”.

It went on “With regard to unpaid instalment totaling GH¢3,131,866.94 as at 1st October 2008, E&P should pay the overdue amount in two equal instalments on or before 15th October 2008 and on or 15th November 2008”.

“Considering the size of the Barclays Bank’s exposure vis-à-vis the receivables channeled through Barclays, Merchant Bank should take over the indebtedness and receivables of Barclays Bank”, the letter told Mr. Ibrahim Mahama.

It continued that “Excess Penal Charges levied on the E&P account should be discounted by 90%. The waiver amount of 90% of the penal charges –i.e. GH¢861,347.00 should be granted to E&P as overdraft”.

Although it said, “This letter is for information purpose. The arrangements above are subject to the signing of a new agreement and other relevant documentation between Merchant Bank and E&P. This shall supersede ant previous arrangement in respect of your obligations to Merchant Bank”, no new letter was signed before the bank started deducting huge sums from cash flow hitting E&P’s account.

Another document dated February 27, 2009 by Merchant Bank and signed by both officials of the bank and Mr. Ibrahim Mahama’s company, disclosed arrangements made between the two institutions to have the loans settled quickly.

It said “further to discussions held with your goodselves on 24th February 2009 in relations to a pragmatic approach to regularizing your Company’s account with the Bank, we confirm the understandings reached as follows;- That the Company’s expected revenue per month as per the cashflow projection would be at least US$4 million;

“That during the tenure of the Company’s facilities with the Bank this amount of US$4 million would be maintained as the minimum inflow;” it said.

“That out of the said US$4 million, US$2.5 million would be applied to service the debt between the Company and Merchant Bank Commercial Bank;” and “That the balance of US$1.5 million would be used by the Company to cover total expenditure including overheads;”

The document said “That the Company is to submit a list of total expenditure to the Bank within the agreed expenditure level;” and “That the Bank would make available to the Company its Corporate Advisory Services expertise upon request as part of the rationalization of the Company’s expenditure vis-à-vis its income”.

The document was signed by the head of Merchant Bank’s Legal Department, Mrs. N.S. Gyang and General Manager in-charge of Corporate and Institutional Banking of Merchant Bank, Justice Boahen, while the Finance Director of E&P, Kwadwo Aboagye-Atta, signed on behalf of Mr. Ibrahim Mahama’s company.

Not long after, came yet another document dated August 5, 2009 again by Merchant Bank in which the state bank talked about its meeting with executives of E&P on September 5, 2009 at the Head Office Annex Building, North Ridge, Accra where a US$60 million African Export and Import Bank (Afrexim) loan facility was discussed.

Acting MD of Merchant Bank, Kwame Osei-Owusu, in the letter disclosed how “…Engineers & Planners Ltd (E&P) intends to payoff both its Ghana Cedi and US Dollar facilities with Merchant Bank upon disbursement of the $60million facility from the Afrexim Bank (Afrexim)”.

The letter said “That the Afrexim facility shall be disbursed by the end of September 2009” and “That E&P will retain Merchant Bank Ghana Ltd (MBG) as the local arranger for the $60m Afrexim facility”.

It explained “That the funds from the above facilities shall be disbursed through MBG” and “That the assignment of receivables from Goldfields Ghana Ltd shall continue to remain in place even after E&P has paid off its existing facilities with MBG”.

It revealed “that Merchant Bank will operate the debt service reserve account or behalf of Afrexim Bank” and “That MBG has E&P’s permission to hold any discussions directly with Afrexim Bank on the above two facilities”.

“That E&P will furnish MBG with the new Life of Mine Contract with Abosso Goldfields, Damang and “That E&P will arrange meetings for MBG with the executives of Goldfields Ghana Ltd and Golden Star Ghana Limited”.

It said “We wish to assure you that Merchant Bank will continue to support your operations especially (but not limited to) the following pipeline projects: the equipment rebuilding workshop at Abelenkpe, the fuel supply business as wells as the oil drilling contracts”.

The facts had been that in August 2007 Ghana Commercial Banks (GCB) and Merchant Bank granted a loan facility of US$37, million to E&P with a tenure of 60 months inclusive of a moratorium period of 6 months. It was to span between August 2007 to June 2012 with a monthly repayment of principal plus interest worked out to US$ 750,000”.

Loan repayment commenced in February 2008 and payments were honoured, but in October 2008, for some unknown reasons the Board of Merchant Bank changed the 60 months tenure to 36 months tenure. This was unilaterally done without consulting the joint Finance Partner, GCB.

The monthly repayment then changed from US$ 750,000 to US$ 2,250,000 per month. The reschedule repayment plan created serious cash flow burden as nothing was left after debt service to support operations and maintenance costs of the construction and equipment rental company, which has employed a number of expatriates.

At the time the facility was granted in August 2007, E&P also appointed Merchant Bank to source a Mining Service Facility of US$ 60 Million from an International Finance Institution. Various due diligence audits were carried out with Merchant Bank appointed as the Local Administration Agent (LAA).

In October 2010, when all the process were completed pending draw down, Merchant Bank frustrated the deal by declining to act as LAA and this stalled the whole process. By mid 2011, a new LAA had to be appointed, and E&P had to look for another Financial Institution; hence Intercontinental Bank, a Nigerian Bank had to start the process all over again.

Intercontinental bank granted E&P a facility of US$ 21 Million in August 2010 to continue its operations. By June 2011, less than a year E&P had repaid this facility. Intercontinental Bank took up the role as LAA and continued the process.

All the necessary due diligence exercises had to be carried out again, and by the close of December 2011, almost all the condition Precedent (CP) had been fulfilled awaiting draw down of the US$72 million, from which Merchant will be re-financed. The facility was oversubscribed due the record time of full repayment, of the facility before the maturity date.

All of a sudden Access Bank acquired Intercontinental Bank and the process once again stalled due to the change of name and owners of the previous LAA Intercontinental Bank. The Board of Access Bank had to give their approval once again. This took another period of not less than four months to get the approval from Access Bank Board.

Approval was finally given in September 2013 and the various stages of the due diligence once again had to be carried out. This time around, it took a shorter period and by close of work on November 19, 2013 all the condition precedents had been honoured and draw down had been assured by December 15, 2013 of which Merchant Bank will be fully paid.

More to come!

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