Shell and Banks say Nigeria’s Aiteo owes $1.7bn in oil loans

One of Nigeria’s biggest oil producers, Aiteo, owes Shell and seven banks $1.7 billion, which if not paid could significantly damage the financial system in the West African country. the West, according to the lenders.

Aiteo Eastern E&P Co. bought a pipeline and operating stake in one of the country’s most prized onshore oil blocks seven years ago for $2.4 billion. Zenith Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc and other Nigerian lenders lent the company $1.5 billion to back the acquisition, while Shell – the seller of the assets – provided $504 million of financing. The parties have been embroiled in a tangled legal dispute since October 2019, when creditors notified Aiteo that it was in default.

Lenders say debt owed climbed to $1.7 billion at the end of last year from less than $300 million at the end of 2019, according to an April 1 English Commercial Court ruling. The rising sum is due to missed repayments, unpaid interest and late payment penalties, the financiers said when they began arbitration proceedings against Aiteo in late 2020, when the amount was $910 million.

These loans are “systematically large” within the Nigerian banking system and “represent significant credits on the books” of the exposed institutions, Lagos-headquartered Africa Finance Corp. said in written evidence in court, according to the judgement. “A loan default would be a very serious matter” for the banks involved, said the AFC, which manages the financial agreement between Aiteo and bank creditors.

Earlier this month, the UK court made permanent an injunction obtained by the lenders and the AFC at the end of 2020 which ordered the oil company that it was contractually bound to stop contesting the claim in the Nigerian courts and resolve any dispute before an arbitration court in London. The judge also denied Aiteo’s request to cancel the injunction.

Shell welcomes the decision, the company said by email. A spokesperson for Aiteo and attorneys representing the lenders did not respond to requests for comment.

A federal court in the Nigerian capital, Abuja, had granted Aiteo an injunction in November 2019 that prevented its creditors from collecting the alleged debt. The company, controlled by tycoon Benedict Peters, has denied being in debt and in default. He argued that lenders were forced to restructure his repayment schedule due to unforeseen “force majeure events” including rampant oil thefts and pipeline leaks.

Aiteo also fought his fight against Shell in two other cases, blaming Shell’s “wrongful actions” for the company’s difficulties in servicing its loans. A Lagos court restricted the oil major’s access to its Nigerian bank accounts in February last year, after Peters’ company argued that Shell misrepresented the condition of the pipeline it sold in 2015.

Aiteo then sued Shell in Abuja in July for more than $2 billion, alleging Shell misrepresented itself as the owner of six oil wells which the buyer claimed were included in the asset sale. Shell says both lawsuits are without merit.

The banks and Shell filed their arbitration claims against Aiteo in December 2020, and the court issued a partial award on March 15, determining that it had jurisdiction to hear the dispute, according to the commercial court’s decision.

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