Posted: Tuesday 12th August 2014 at 16:06 pm

Statement: VTB Capital loan deal, another fiasco? Minority asks

b10d240x mg n63umy8lkf 5203624492200 2035021200051 Statement: VTB Capital loan deal, another fiasco? Minority asks


In March 2014, the Ministers of Finance and Defence submitted a joint memorandum to Parliament requesting Parliament to approve a $300m Credit Facility between the Government of Ghana and VTB Bank Capital to further enhance the Ghana Armed Forces’ participation in International Peace Support Operations. After an exhaustive process by the Finance Committee, Minority Members on the committee did not support the recommendation for the approval of the facility as presented to the House.

It must be noted that the Committee’s report which was ready on April 1, 2014, during the first meeting of Parliament, was not laid before the House. This was because the Speaker, persuaded by the force of the arguments of the Minority, agreed that further consultations were needed, in addition to conducting further due diligence, and creating space for the Attorney General’s advice on some of the obligations of the Lender and Arranger.

Surprisingly, the same report, in its original shape and form, was what the House approved during the just-ended second meeting of Parliament. It stands to reason, therefore, that the Minority’s objection to the approval of the facility as presented earlier to the House remains relevant.

What were or are the concerns of the Minority NPP? Firstly, this is the first time VTB Capital is dealing with Ghana. In this very first dealing with the Republic of Ghana VTB Capital is to act as Lender, Arranger and Facility Agent. This pact, an unholy trinity of an arrangement, the Minority insists, is an illogicality and, indeed, unjustifiable as it engenders a conflict of interest situation on the part of VTB Capital. Upon enquiry the explanation which was offered was that VTB was only a part-lender and they would further act as a lead arranger to source funds to complete the loan deal. As we speak, fellow Ghanaians, the Parliament of Ghana, acting through the NDC MPs, has approved the syndicated loan without knowing the other lenders who are to provide funds.

 
Further, as a country, since we do not know the identity of the other co-lenders, we do not also know their sources of funds and other crucial details such as their latest annual reports, credit rating and audited financial statements.

Is it safe for us as a country to throw up our hands into the air and declare, nonchalantly, that we do not know the track record of those lending money to the Republic? In this era of money- laundering and other financial malfeasance, how can we (Ghana) be sure that the other lenders are people or entities that we want to do business with?

It is significant to note that over the past couple of weeks, VTB, the part-lenders, have entered the market seriously trying to source $1.5 billion from Banks in the U.S.A. Ironically, their attempt at securing a loan from US banks has hit a road block due to US and EU sanctions on Russia for invading Ukraine. It must also be mentioned that the alarm bells of possible sanctions on leading Russian banks, including VTB that the Ghana government has chosen to deal with, were pointed out by the Minority group only to be ignored as usual.

The fourth sticking point was the lack of proper due diligence by National Security and the Bank of Ghana. The due diligence report by the National Security outfit was an apology of a due diligence. Had it not been cursory and deficient, it should have clearly indicated the possibility of sanctions being imposed on VTB, and the political risks thereof. As for the due diligence report submitted by the Bank of Ghana, the least said about it the better. Part of their report submitted to the Ministry of Finance read, “the Department is however unable to confirm whether VTB Capital can successfully conclude the proposed transaction since that is dependent on its ability to meet single counterparty exposure for the secured and unsecured facility as well as other local regulations in the United Kingdom”. Of course such a disclaimer would usually exist, especially, if the exercise is conducted by a private group. But it is for this reason that the Central Bank was asked to vouch for VTB’s Capital’s ability to successfully conclude the deal. Would same have been said of Citigroup or Barclays, Pic, for instance? Certainly not. And that is why the nation should be concerned.

The fifth major concern raised was the issue of value for money. The cost of procuring or contracting that $300 million facility does not make financial sense under current international credit conditions. Whereas the 6 month LIBOR rate is on the decline, the margin to the LIBOR

is very high: LIBOR+7%? This is a rip-off for a 5-year loan. Even the CDB loan, a 15 – year loan had an interest rate of LIBOR + 2.95%. More so, for a short-tenured facility! The person or group of persons negotiating for Ghana must have slept on the job.

It is significant to note that when the Ministry of Finance requested the AG to proffer an opinion on the loan agreement, the AG who would ordinarily give legal advice had this to say with respect to the provision relating to interest, that is, clause 8: “the provisions of this clause should be reviewed by the Debt Management Division of the Ministry of Finance and the appropriate advice given by the Division”. So where have we reached now? The AG advising the Ministry oi Finance on financing and interest rate issues?

To add insult to injury, the good people of Ghana are being asked to pay upfront fees of 1.85% or $5.5m and Management fees of 2% or $6m. Who gets the Management fees? Are we paying VTB for managing its own loan portfolio? Or is it the case that VTB is going to pay some other party to manage its portfolio? If it is the former, one should raise a red flag as it arouses suspicions. If it is the latter, it would simply mean that VTB is incompetent to manage its own portfolio. Either way this country must smell a rat, or an umbrella under which people who are engaged in various improprieties are taking a refuge. The Upfront fees, the Management fee and the 7% markup on LIBOR all smack of a dubious transaction.

Finally, the Ministry itself asked the AG to give an opinion in respect of the loan agreement. The AG raised serious issues in a letter dated April 1, 2014. The AG had concerns with the purpose letter, which incidentally was not furnished to it to enable her office to study its contents in conjunction with the entire loan agreement. The AG also noted that this was a departure from usual financing agreements where the Lender monitored activities of the Borrower to ensure proceeds of the loan were rightly used. These are but a few of the AG’s concerns. All of them, sad to say, were ignored.

In presenting the Budget Statement and Economic Policy for the 2U14 Financial year, the Finance Minister assured that the country was not going to contract new loans. Indeed he re­emphasised the point in March when he appeared before Parliament to present an urgent statement on the government’s financial and Economic Policy in the face of shivering economic indicators. Clearly, the Minister never meant his words when he said Government was not going to contract any new loans. For it was on that very day in March 2014, less than 30 minutes after that bold declaration that he made a, volte-farce and submitted a request for the $300 million VTB facility. It looks as if phrases such as “due diligence”, “value for money” “Ghana First”, “for God and Country” do not mean anything to this government. That explains why the country finds itself in such labyrinth.

Ladies and Gentlemen of the media, the profile of the VTB loan facility is simply not good and it is the reason why the Minority NPP in Parliament washed our hands off the loan. It is simply one bogus loan too many, and once again we raise these alarm bells for the country to know that it is such unscanned procurements that have landed the country in the mess that we find ourselves today. When will the brakes of circumspection and introspection be applied to unfettered borrowing by the NDC? Ghanaians should demand a response.

In the light of the government’s decision to seek a bail-out from the IMF we call on government to abandon the chase for the VTB facility to avoid Ghana also being sanctioned by the EU and the US.

Thank you very much ladies and gentlemen for your prompt response. 

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