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The plot behind Access Bank’s Mareva injunction against Seplat and Cardinal Drilling

Access Bank obtained an Ex-Parte Order from a Federal High Court against Cardinal Drilling Services, Seplat, ABC Orjiakor, and Kalu Nwosu.

In a dramatic move on Friday, Access Bank sealed the offices of Seplat Petroleum Development Company (Seplat) over third party loans owed to it by Cardinal Drilling Services.

Seplat issued a press release on the website of the Nigerian Stock Exchange vowing to sue Access Bank claiming that “the action was taken by Access Bank without any prior notice to SEPLAT, as required under Nigerian law.”

Access Bank sources indicate the outstanding loan is about $85.8 million and is secured by a fixed and floating Debenture over Cardinal’s assets.

Seplat claims it is neither a shareholder in Cardinal Drilling and that it has no “outstanding loan obligations or guarantees to Access Bank…”

Access Bank obtained an Ex-Parte Order from a Federal High Court against Cardinal Drilling Services, Seplat, ABC Orjiakor, and Kalu Nwosu.  The bank also obtained a Mareva injunction freezing the accounts of Seplat in Nigeria and abroad. Reliable sources with knowledge of the matter claim Access Bank was targeting ABC Orjiakor in the Sealing of Seplat headquarters.

The Mareva Injunction targeted the following assets;

  • 25, Lugard Avenue, Ikoyi, Lagos,
  • 6, Agodogba Avenue, Parkview, Ikoyi, Lagos
  • 11, Oba Adeyin’ka Oyekan Street, Ikoyi, Lagos

Seplat claims it is neither a shareholder in Cardinal Drilling and that it has no “outstanding loan obligations or guarantees to Access Bank and did not at any time make any commitments or guarantees in respect of Cardinal Drilling’s loan obligations”  to the bank.

How Seplat got roped in

According to a source, Cardinal Drilling Services obtained a loan from Diamond Bank in 2012 and used it to purchase CDS Rigs 101, 201, 202, and 203.

  • The rigs were used to provide drilling services to Seplat in a contract that helped fund Cardinal Drilling services 60% equity in a JV with Maurel & Prom.
  • Sources at Access Bank allege Cardinal Drilling Services was a vehicle setup to obtain the loan to purchase the drilling services knowing fully well that Seplat was to be the main beneficiary.
  • It is unclear if Cardinal Drilling Services drills for any other oil company beyond Seplat. The company’s website did not list who it provides services for.
  • Kalu Nwosu is the Managing Director of Cardinal Drilling and is said to have provided a personal guarantee and a statement of personal net worth as security for the loan.

What Access Bank hopes to achieve

Access Bank appears to have also gone after Seplat because ABC Orjiakor, the chairman of Seplat, is an investor in Cardinal Drilling.

  • According to a source, by joining Seplat to the case, Access Bank believes it will pile pressure on Seplat forcing it to reach a deal that will either see the loan repaid or get some guarantees from Seplat that it will get ABC Orjiakor to allow the bank take over the assets of Cardinal Drilling without a tussle from Orjikor.
  • In a document, the Bank explained in a court filing that its decision to go after Seplat was because there is an “intercompany relationship between SEPLAT and Cardinal Drilling”, noting that “they are jointly promoted by Orjiako”  its primary target.
  • According to the document, “SEPLAT is a sister company to Cardinal, jointly promoted by Orjiako who is the alter ego of the two companies.” 
  • Seplat in its annual report disclosed Cardinal Drilling Services as a related party based on entities controlled by Key Management Personnel.
  • It revealed in the annual report that “Cardinal Drilling Services Limited (formerly Caroil Drilling Nigeria Limited): Is owned by common shareholders with the parent company. The company provides drilling rigs and drilling services to Seplat. Transactions with this related party amounted to N2.89billion, $9.44million (N621million, $2.03million). Receivables and payables were nil in the current period (receivables in 2018: N1.49billion, $4.87million).”

Bottom Line

Access Bank is understood to be grappling with a string of bad loans issued under the defunct Diamond Bank. Sources inform that the bank is stepping up efforts to go after some of the debtors by obtaining several court orders to seize properties.

  • From what we know, Seplat does not owe Access Bank any loan and is only being joined in this matter because of ABC Orjiakor its Chairman and co-founder.
  • The Bank is doing all it can to recover its debt from Cardinal Drilling Services even if it means dragging Seplat into the mess.
  • We are also surprised the bank was able to get an Ex-Parte Order from a Federal High Court against Seplat even though it was not the company that borrowed the money and neither did it guarantee it.
  • The transaction once again highlights controversies surrounding the murky waters of loans to companies in the oil and gas sector most of which end up going bad and written off by banks.
  • According to CBN data, Oil and Gas loans (upstream) makes up N3.6 trillion or 19% of total banking sector credit to the private sector. This is the highest of any sector.
  • About N268 billion of oil sector loans are said to be non-performing.

Seplat share price closed flat at N402.3 on Friday while Access Bank shares closed lower by 0.58% to N8.55 per share.

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