Geregu’s chairman points to former owners in N40bn bond dispute, seeks reimbursement

Abdul’aziz Yari, the chairman of Geregu Power Plc, has moved to draw a line between himself and a N40.09 billion bond default that has rattled investors in one of Nigeria’s most closely watched independent power producers, saying he covered the shortfall out of his own pocket and now expects the company’s former owners to make him whole.

Yari, in a signed statement, said he stepped in to clear the outstanding coupon and principal payment on Geregu’s Series 1 Senior Unsecured Bond “in the interest of the institution I am privileged to chair”, but was careful to say the move was not an admission that the debt was his to begin with.

“This is not an admission that the obligation is personally mine,” Yari said, adding that it also does not amount to a finding that the current board or management created the problem.

The bond, a N40.09 billion instrument sold in July 2022 at a fixed coupon of 14.5 percent, was issued more than three years before Yari’s group, MA’AM Energy Limited, took control of Geregu in a roughly $750 million deal completed in December.

That takeover ended Femi Otedola’s long tenure as the company’s controlling shareholder and chairman; Otedola had built up his stake after selling out of Forte Oil Plc more than a decade earlier.

Geregu missed its eighth semi-annual coupon payment and fourth scheduled principal repayment on the bond, according to a listing update from FMDQ Securities Exchange, which flagged the instrument as being in credit default.

The company later confirmed to bond trustees that the outstanding amounts had been remitted, effectively curing the default, though the episode has left a mark on the stock. Geregu shares, which traded above N1,019 within the past year, closed at N825.70 in mid-August, a decline of roughly 19 percent from their 52-week high.

Read also: Geregu pays investors N6bn owed on N40bn series 1 bond

Yari said discussions with the bond’s original architects, the former owners and management under whose watch the instrument was issued, were continuing, and that those parties had indicated a willingness to work toward what he called a full and fair accounting of how the obligation arose.

“Our objective, ultimately, is a final, mutually acceptable resolution,” Yari said, pointing to fair treatment or reimbursement of the funds he advanced, alongside firmer arrangements for the company’s future bond obligations.

The dispute has drawn scrutiny beyond the boardroom. Analysts have questioned how proceeds from the 2022 bond, raised under Geregu’s N100 billion multi-instrument debt programme, were deployed in the years before the ownership change, and whether roughly N31 billion in restricted cash tied to an unfinished power-plant acquisition played a role in the shortfall that emerged this year.

Farouk Yusuf, a financial expert who discussed the default on Arise Television, said the amount that had fallen due stood at about N6 billion as of late July, out of a bond payable balance of roughly N34 billion at the end of last year.

Yari’s office has cast his decision to fund the cure personally as consistent with his responsibilities as both a shareholder and a sitting senator.

In an earlier statement, he said Geregu’s reputation for reliability and sound governance made the matter one he could not treat as someone else’s problem, even though, as chairman, he sits outside the company’s day-to-day management.

That distinction, he said, exists so a board can provide oversight without duplicating the work of management, a point he said he was making not to distance himself from the company’s obligations, but to clarify the capacity in which he was speaking.