General Hydrocarbons Limited Denies First Bank $225 Million Debt Allegations, Calls Allegations "Confusing".
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General Hydrocarbons Limited (GHL) has denied allegations by First Bank of Nigeria (FBN) Plc over an alleged $225 million debt, calling the allegations fraudulent and baseless.
In a statement signed by GHL's Chief Strategy and Operations Officer, Abdelmuizz Bello, the company criticized recent media reports on the matter, calling the allegations "confused, baseless and malicious."
GHL stressed that it was not indebted to FBN and had acted in accordance with legally binding agreements.
"The allegations of misappropriation of monies advanced to GHL are therefore extravagant and baseless as the payments were made by FBN directly to the service providers after review and approval by its credit and risk teams," Bello said.
He further explained: "Ultimately, FBN became a lender, a risk manager and a conflict of interest operator when it was involved in the verification, approval and payment of all invoices. At the same time, FBN approved and appointed a Chief Financial Officer for GHL, assuming full responsibility for all financial disbursements."
Substitution Agreement and Financial Obligations
According to Bello, GHL entered into a substitution agreement with FBN on May 29, 2021. Under the agreement, FBN will finance the exploration and development of OML 120 by GHL in exchange for a 50% share of the profits from oil revenues for a period of eight years.
This profit-sharing arrangement, Bello said, was designed to help FBN resolve its non-performing loans (NPLs) and stabilize the bank's financial position. He also said that FBN's debt came from non-performing loans with Atlantic Energy, a company that operates separate oil fields under strategic alliance agreements.
"In its bid to stay afloat, FBN sold the $600 million loan as an Eligible Banking Asset (EBA), with the support of GHL. The bank then recovered the money from the Asset Management Corporation of Nigeria (AMCON), using it to rebuild itself without addressing GHL's needs," Bello added. Court decisions and allegations of embezzlement
Citing a decision of the Federal High Court in its favor, GHL found that FBN was restrained from interfering with the company's operations or appointing an alternative operator for OML 120. Despite this decision, FBN is said to have sought and obtained a Mareva injunction from another court. freezing the accounts of GHL.
Bello described this as a clear abuse of legal process and reiterated that all payments to contractors and service providers involved in OML 120 were reviewed and approved by FBN's credit and risk teams , rendering the embezzlement allegations unfounded.
Operational challenges and funding delays
GHL criticized the FBN's failure to meet its funding commitments, citing delays in the disbursement of approved funds that sometimes stretched up to 70 days.
These delays have disrupted operations, resulting in significant financial losses. Service providers, including Schlumberger and Baker Hughes, were paid sporadically, leading to inefficiencies and arbitration against GHL. Despite an initial disbursement of $185 million, FBN's refusal to provide additional financing delayed the development of OML 120. GHL argued that the loan was not yet due for repayment because it remained within the moratorium period specified in the replacement agreement.
What you need to know
According to a leaked letter to Central Bank Governor Yemi Cardoso, the dispute stems from an agreement between FBN and GHL that was initiated during the tenure of Oba Otudeko, former chairman of FBN Holdings Plc.
In 2020, GHL partnered with FBN to develop OML 120 after the bank faced financial exposure from non-performing loans related to Atlantic Energy. The agreement was designed to revive FBN's accounts, with profits from OML 120 being allocated to offset unpaid receivables. GHL claims that FBN has reneged on its obligations, delaying payments and causing significant financial setbacks, including the loss of the Blackford Dolphin drillship, for which GHL is now making claims of more than $100 million in arbitration.
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