First Bank and Nduka Obaigbena

*First Bank reacts: “We did not abuse court process”

The conflict between General Hydrocarbons Limited (GHL) owned by Nduka Obaigbena, Chairman of Arise and publisher of ThisDay Newspapers, and First Bank of Nigeria Limited over a $225 million debt is not yet over. GHL has been shouting to tell anyone who cares to listen that it is not owing First Bank $225 million.

Trouble started with the Mareva injunction granted by Justice Deinde Dipeolu of the Federal High Court in Lagos based on an application by First Bank and FBNQuest Trustees Limited.

The court , apart from restraining financial institutions in Nigeria from releasing funds to GHLalso barred the accounts of Efe Damilola Obaigbena and Olabisi Eka Obaigbena (first to fourth defendants), who are GHL directors.

However, Abdelmuizz Bello, Director of Strategy and Operations, GHL, in a statement accused First Bank of abuse of the court process.

The company said it entered a legally binding, enforceable Subrogation Agreement with First Bank on May 29, 2021.

GHL said the bank agreed to fund its exploration, production and development of OML 120 in exchange for sharing profit from oil proceeds from the OML in a 50:50 ratio after statutory payments and taxes over eight years.

It said the FBN’s 50 per cent share will then be used to pay down its non-performing loans of about $718million, which was discounted to $600million to resolve its solvency issues.

The statement reads: “In its quest to stay afloat, the FBN loan was sold at $600million as an Eligible Banking Asset (EBA), with comfort from GHL; the FBN then collected the cash from Assets Management Company of Nigeria (AMCON) with which they rebuilt the bank without meeting GHL’s needs.

“The FBN non-performing loan arose from FBN’s unsecured and reckless lending to Atlantic Energy under separate Strategic Alliance arrangements, in which GHL had no nexus to or connection with.

“The agreements made it clear that the Non-Performing Loan had nothing to do with GHL beyond the fact that 50 per cent of profits from OML 120 due to FBN under the Subrogation Agreement will be used by FBN  to settle the hole created in its books by the Non-Performing Loan (NPL).

“For clarity, Atlantic Energy operated OMLs 26, 30, 34 and 42 – very different from GHL’s OML 120.

“The agreements signed with GHL enabled the FBN to return to good standing as follows:

“Instead of declaring a loan loss of N302Bn at the then exchange rate, the signing of the Tripartite Agreement with GHL enabled FBN to declare a profit of N151Bn ($377.5million) for the year ending December 31, 2021.

“GHL signed the agreement trusting and believing that the FBN which it thought was a bank with integrity, would comply and continue to comply with its obligation to fund OML 120; FBN’s failure and refusal to do so has opened a challenge to its audited financial statement. Given its non-compliance with conditions precedent for its return to profitability, could those profits remain valid? And were investors in its current rights issues duly informed?

“FBN’s market capitalization before the agreement was N256.6bn. Had it declared a loss of N302Bn, the bank would have had a negative capital of N46Bn.

“FBN then immediately realised profitability from the GHL’s subrogation agreement. GHL signed the agreement believing and trusting that the FBN as a bank with integrity would comply and continue to comply with its obligations to fund OML 120, but it has clearly not done so.

“Following the agreements with GHL, FBN’s market capitalisation of N256.6Bn, more than tripled to over N900Bn as of 30th November 2024.”

GHL said its grouse is essentially FBN’s failure to meet its agreed and executed financial commitments, which it had believed would be made when it signed the agreement.

This, the company said, resulted in critical challenges for the development of OML 120.

GHL added: “Although FBN had disbursed $185million, the way and manner of the disbursement which was agreed to be five days after funding request, sometimes lasted up to 70 days after funding request; service providers led by Schlumberger, Baker Hughes and Century that were supposed to be paid at the same time for various interventions were paid sporadically at different times, resulting in massive losses in day rates and downtimes, leading to inefficiencies and losses of over $147 million, including an arbitration award to one of the service providers.

“It is important to note that FBN’s credit and risk team verified and approved all contracts and invoices due to the contractors engaged for the development and operations of the oil mining lease and made payments directly to these contractors and service providers.

“The allegations of a diversion of the monies advanced to GHL are therefore befuddling and without merit as payment were made by FBN directly to service providers after vetting and approval by its credit and risk teams.

“At the end of the day, FBN became a conflicted lender, risk manager and operator at the same time when it got involved in vetting, approving and paying all invoices.

“At the same time, FBN also approved and later appointed a CFO for GHL, taking full responsibility for all financial disbursements.

“The oil block is over 75 kilometres offshore Nigeria, with a Floating Production Storage and Offloading (“FPSO”) that requires transportation and logistics support with over 250 personnel on the FPSO and the associated submersible rig.

“This has involved heavy logistics planning with over 500 helicopter sorties, engagement of platform supply vessels, security vessels, mooring vessels, etc., which were provided daily over the course of the last 40 months.

“All these expenditures, including food, were vetted, approved and paid directly by FBN’s credit and risk teams.

“In view of the approval process for the funds put in place by FBN, and the payment made directly to contractors and service providers, the allegation of diversion contained in some publications is therefore wicked, malicious, false, injurious and libellous.

“The disbursed loan of $185million is not due for repayment. The loan is still within the moratorium period as per the Facility and Tripartite Agreements.

“The loan is only due when there are profits to be shared 50:50 from commercial oil production.

“Clearly, there is a need for much more money which FBN has refused to provide.

“Instead of performing its role as a lender who was saved from the abyss, FBN is trying to bully and force GHL out of the transaction and take over the oil bloc, using its directors and other proxies with this clearly induced crisis.

“It is also instructive to note that First Bank has made no demand for repayment of the facilities until after the fact a few days after they lost in court, as they know that the loan is not due for repayment.

“Clearly, FBN is either illiquid, unable or unwilling to fund the project as agreed after they had made profits upfront.”

GHL said it seeks to exercise its options under the agreement to find new lenders and partners that can be efficient and cost-effective to save the project for Nigeria “should FBN remain intransigent”.

It added that the Subrogation Agreement contains a clause that allows GHL to seek for alternative financing in the likelihood FBN is unable to provide such financing.

The company continued: “Following FBN’s non-performance under the terms of the Subrogation Agreement, GHL was left with no option but to approach the Court to seek injunctive reliefs and protective orders to secure its commercial and economic interests and find resolution via arbitration.

“GHL approached the Federal High Court and after arguments by both sides, obtained the following injunctions against First Bank on December 12, 2024:

“‘An Order restraining FBN from obstructing or preventing GHL from obtaining or securing loan facilities or funding necessary for the exploration or operation of OML 120.

“‘An Order restraining FBN from making any calls or demands, or taking any steps whatsoever to enforce any security, receivables, instrument, finance documents or assets of GHL which have been charged as Security.

“‘An Order restraining FBN from appointing an operator, asset manager or any person/institution of the same/similar ilk in respect of OML 120, pending the hearing and determination of the arbitration proceedings between GHL and FBN’.

“Despite the existence of a subsisting court order, FBN, using the same lawyers who lost at the Federal High Court presided by Justice Allagoa, went to another judge of coordinate status, during recess without disclosing the earlier judgment, to obtain an interim Mareva injunction restraining GHL and its shareholders from operating their accounts over a purported and unfounded debt of $225.8million.

“The FBN had since weaponised the Mareva injunction which it obtained on December 30, 2024, to confuse the public and befuddle the issues. A clear abuse of the Court Process.

“This impunity is now back before the Federal High Court, Lagos. We believe that sooner or later Justice will be served.”

First Bank Reacts

However, First Bank on Tuesday denied abusing any court process over the  $225m debt, In a statement, the bank said: “As a responsible and law-abiding corporate citizen of Nigeria with the utmost respect for the courts, FirstBank will not be able to offer comments on issues which are pending for determination by the courts, as such issues are sub-judice,” the statement said.

“However, we are constrained to issue the following clarifications to correct the sponsored but false narratives on the matter presented in some of the media publications.

“There is a subsisting commercial transaction between FirstBank as lender, and GHL as borrower, where FirstBank extended several credit facilities to GHL for the development of some Oil Mining Lease assets.

“These facilities are backed by very robust loan agreements executed by the parties in which the obligations of the parties are clearly defined and the security arrangement clearly spelt out.

“While FirstBank has diligently performed its obligations under the loan agreements, at the root of the present dispute is FirstBank’s demand for good governance and transparency in the transaction, which GHL rejected.

“Upon FirstBank’s realisation of breaches on the part of GHL including diversion of proceeds, FirstBank requested that an independent operator mutually acceptable to both parties be appointed in line with the terms of the agreement, to operate the financed asset in a transparent manner that will bring greater visibility to the project, protect the interest of, and bring value to all stakeholders.

“Not only did GHL roundly reject this reasonable and fair request, rather GHL insisted that FirstBank avails it with more funding.

“GHL refused to execute the terms of offer stipulated by the bank for the availment of additional funding but rather proceeded to commence needless Arbitral proceedings.

“GHL issued a notice to initiate arbitration and has no substantive claim pending at the Federal High Court.

“GHL approached the Federal High Court solely to seek preservative orders pending arbitration.

“Some of the preservative orders sought by GHL were granted while others were denied.

“FirstBank is the only party that filed a substantive claim against GHL at the Federal High Court and the subject matter of FirstBank’s claim is not identical with the dispute GHL submitted to arbitration.

“FirstBank’s claim is in respect of subsequent credit facilities granted to GHL and the offer letters and finance documents pertaining to the subsequent transactions clearly state that the disputes arising from the subsequent facilities are to be resolved by a court of competent jurisdiction in Nigeria and not by arbitration.

“Consequently, it is incorrect to assert that FirstBank abused the process of the court.”

“GHL off-took crude from the Floating Production Storage and Offloading (FPSO) vessel and diverted the proceeds.

“The bank had no choice as a secured lender, under these circumstances of continued breaches, non-payment of due obligations and attempts to shield the bank away from agreed security and repayment sources, than to approach the court for legal remedies, to preserve assets, recover the diverted proceeds, prevent reoccurrences and safeguard FirstBank’s interest.

“It is clear to us that the courts do not support or protect illegalities and breaches of contracts.

“FirstBank has a long and very rich history of supporting and providing for the financial needs of its customers over its more than 130 years of unbroken existence.

“FirstBank remains committed to ensuring that it continues to support legitimate business aspirations of its teeming customers.

“At the same time, FirstBank is committed to the building of a strong credit culture where borrowers pay their debts when they borrow and will always take appropriate steps, within the ambit of the law, to resist attempts by borrowers to repudiate their repayment obligations.

“We wish to assure FirstBank’s numerous customers, stakeholders and the general public that FirstBank remains solid, calm, steadfast and unflinching in its resolve to continue to provide first-class services to its teeming customers within and outside the country.

“FirstBank also wishes to respectfully thank our shareholders for the indicatively over subscribed Rights Issue of its parent company, First Holdco Plc (“FirstHoldco”), in the first round of its capital raise and looks forward to an equally successful final leg of the recapitalisation exercise when it is announced by FirstHoldco.”