Updated: The Asset Management company of Nigeria has announced a record N304.3 billion loss for the full year ended December 2015.
We understand that the Asset Management Company of Nigeria is about to release its 2015 full year financial results any moment from now.
According to information reaching Nairametrics, the bad loan bank could be announcing a loss after tax that ran into hundreds of billions of Naira.
The Asset Management Corporation of Nigeria (AMCON) was set up in the aftermath of the banking crisis of 2009 and was mandated to buy over bad loans from commercials banks in exchange for bonds. It was to then oversee a restructuring of these debts into longer term loans thereby given obligors time to repay.
However, most of the obligors have been defaulting on their loans inherently due to the original terms given to them by commercial banks. Some of the companies had business models which required long term loans of over 20 Years and a debt to equity ratio that help lower weighted average cost of capital.
Rather, the loans were mostly structured to generate cash flow obligations that were much more than the actual cash flows generated after backing out operating expenses. This meant that the companies will be in perpetual default.
AMCON unfortunately, could not afford to restructure the loans long enough. Some of the loans that were converted to equity also had major issues as the underlying assets remained loss making for years.
Since it’s establishment over 5 years ago, the corporation is yet to declare profits. The bad bank in 2014 reported that it had a negative shareholders funds of over N3 trillion. This means that the Nigerian Government who are shareholders via the CBN and the Ministry of Finance had lost over N3 trillion in investments in the bank.
AMCON is also heavily indebted to the Central Bank with over N2 trillion in bonds which by all accounts is now impaired. The implication of this is that the CBN may also declare losses at the end of 2016.
This development provides another major concern for the banking sector which has for the past few months grappled with a deteoriating econony, depreciation of the naira as well rising loan losses. An insolvent AMCON could signify a collateral trouble for the financial services sector due to its strategic role in insulating Nigerian banks from going bust.