Honeywell Group, on Monday, debunked the reported allegation that its loan to First Bank of Nigerian is non-performing, following which the Central Bank of Nigeria (CBN) directed its recall within 48 hours, noting that its facilities have always been performing.
The CBN had in its letter of April 26, 2021, through the Director, Banking Supervision, Haruna Mustafa, warned that where this fails, it will take appropriate regulatory measures against the insider borrower and the bank.”
Honeywell Group said in its “statement on recent events,” insisted that credit facilities “accessed from First Bank and indeed, other banks, were granted after due negotiations, with the necessary documentations and in line with regulatory policies and industry standards
“We have serviced all our credit facilities in line with the terms agreed with First Bank and at no point have any of these facilities been non-performing,” the statement stressed further.
Continuing, Honeywell Group also insisted that it “has continued to meet all its obligations on its facilities with the bank according to agreed terms and has reduced its exposure by nearly 30% in 2.5 years. The facilities were charged at market rates and the bank continues to earn significant interest therefrom.”
The statement recalled that genesis of the current matter to 2015, when First Bank on the directive of the CBN “drew our attention to a 2004 circular (BSD/9/2004) which requires that insider related facilities must not exceed 10% of paid-up share capital.
“Based on this directive, we subsequently entered negotiations with the bank to agree an appropriate repayment structure and the final negotiated position was duly approved by the CBN. It is important to note that from the inception of the facilities and to-date, the facilities have been performing.”
The CBN Governor, Godwin Emefiele, had while announcing the dissolution of the boards of First Bank and FBN Holdings, noted the initial significant improvement in the bank’s financial condition with the positive trajectory of financial soundness indicators, while the insider-related facilities remained problematic, because the insiders who took loans in the bank had controlling influence on the board.
As a result, he lamented, they “failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank.”
For instance, Emefiele recalled that the CBN’s most recent “target examination as at December 31, 2020 revealed that insider loans were materially non-compliant with restructuring terms (e.g. non-perfection of lien on shares/collateral arrangements) for over three years, despite several regulatory reminders.”
But Honeywell Group in the statement dated May 2, 2021, stressed that “in accordance with the agreed terms, our facilities are adequately secured with First Bank, with collaterals in place at over 170% of Forced Sales Value and 230% of Open Market Value.”
On the claims of non-perfection of lien on shares/collateral arrangements for over three years, despite several regulatory reminders, Honeywell Group said in addition to the collaterals in place, First Bank, had “on the directive of CBN, requested additional security in the form of FBN Holdings Plc shares held by the chairman of Honeywell Group, Dr. Oba Otudeko, citing a 2001 circular. This was duly provided through an authorization to place a lien on the shares.”
Tracing its professional business relationship with First Bank to 1972, he said Honeywell Group had always dealt with the bank at arm’s length and in accordance with all regulatory industry practices and norms.
Honeywell noted that as a law-abiding, responsible investment holding company, it has positively impacted society and various stakeholders in all of the almost five decades of its existence, being at the forefront of the developments in such key sectors of the Nigerian economy, as telecommunications, real estate, hospitality, and financial services, through its investments in food manufacturing and processing companies. This, it said, is besides providing employment to over 10,000 Nigerians, while also supporting thousands more through partnership and community programmes.