According to him, if the claim by the two major shareholders, SNNIT and SIC Life, that they were not involved in the processes is true, then the acquisition of more shares was illegal.

Fortiz acquired 90 percent of then Merchant Bank for 90 million cedis in 2013 and was expected to inject an additional 50 million into the bank subsequently as part of the agreement.

Fortiz however, after acquiring the 90 percent shares paid GHC 10 million as equity capital and entered into an unsecured subordinated debt instrument facility referred to as a convertible loan to take care of the extra GHC40 million.

The Social Security and National Insurance Trust (SSNIT) and SIC Life went to arbitration claiming that the conversion from debt to equity of the tier two debt was done on their  ‘blindside.’

According to the claimants, the entire 50 million cedis was initially expected to be provided in the form of equity and it was because Fortiz was unable to provide the entire amount that the Bank of Ghana directed it to inject a mix of equity and tier two debt capital into the company.

They therefore argued that it was not right for Fortiz to have used the means it did to acquire more shares than contemplated in injecting the GHC 50 million into the bank.

Speaking on Eyewitness News, Mr. Iddrisu explained that if the claim by the two shareholders that this happened on their blindside was correct, then that renders Fortiz’s act illegal.

“They had a contract that converted that loan into equity. That money that was borrowed actually was a guarantee for the three shareholders banks to take that money meanwhile it was converted to benefit only Fortiz,” Iddrisu added.

[contextly_sidebar id=”Ds9tDJLgbK1adkKykPgxltzwIg8SibhW”]The arbitration panel however dismissed the claims of SSNIT and SIC Life saying “although the consideration paid by Fortiz in acquiring UMB could have been made payable to SSNIT and SIC Life, they agreed to use the money to increase the capital adequacy ratio of the bank, which agreement the panel did not find illegal.”

In the formerly wholly state owned Merchant Bank, the Social Security and National Insurance Trust (SSNIT) controlled an 89.6 percent stake with the remaining 10.4% belonging to SIC Life.

SSNIT and SIC Life sold 90 percent of the bank to Fortiz, with the expectation that they could claw back more shares when a plan by the special purpose vehicle, the Merban Assets Recovery Trust (MART) succeeded in recovering more than 30 percent of the bank’s bad or impaired loans.

But Fortiz opted for a cause of action which resulted in the increasing their stake in UMB, whilst reducing the state owned entities’ shares from 10 percent to 5 percent jointly.

Problems with contract

Mr. Iddrisu said all these problems for the state entities stemmed from a contract that “was not properly construed.”

“…the GHc 40 million [borrowed from the bank] actually belongs to the two shareholders and not Foritz for borrowing the money, because that same money was sitting in the bank and the bank assets were sitting as collateral.”

He noted further that the money belonged, by extension, to workers but was converted to equity, constituting an illegality.

“They borrowed it from the asset management company, that actually belonged to the total bank, and which’s money belonged to workers and that same money was used to convert to equity up front, making them reduce the shareholding down to 4.3 percent. That alone is an illegality.”

Background

Fortiz paid GH¢90 million for a majority stake in the bank with the understanding that an additional injection of GHS 50 million would be injected within a six month period.

The amount gave them a controlling stake of 90 percent in the bank, leaving the minority 10 per cent to the country’s pensions fund manager, SSNIT and SIC Life Limited.

But after an initial payment of GHS 10 million to UMB as equity capital by Fortiz, it entered into an unsecured, subordinated debt instrument facility, referred to as a convertible loan with the bank, through which an additional GHS 40 was invested into UMB.

Soon after it was concluded, the loan was converted into equity, in accordance with the Term sheet as approved by the AGM.

This led to SSNIT’s shares reducing from 8.96 to 4.43% of the company and valued at GHS 2,565, 537, while that of SIC life reduced from 1.04% to 0.51% and valued at GHS 297, 780.

Subsequently, SSNIT and SIC Life took Fortiz and UMB to arbitration in January 2017 claiming among other things that Fortiz erred in the means it did to acquire more shares in the bank.

The arbitration panel however roundly rejected the claims by the two.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Fortitz’s acquisition of extra UMB shares illegal if … – Mahama Iddrisu appeared first on Citi 97.3 FM - Relevant Radio. Always.

He alleged that the representatives might not have had the interest of workers at heart hence the many infractions that are emerging in relation to the $72 million non-functional digitization project as well as SSNIT’s depreciated shares in the UMB bank.

[contextly_sidebar id=”JQQk1QgWVfMg8ejULK3CYqbRe2Nse8xz”]Mr Awuni had earlier challenged the acquisition of Merchant Bank (now UMB) by Fortiz  in court, but he lost.

In a new twist of events, however, it has emerged that the Trust which hitherto had over 80% shares in UMB, now controls only 4.43% due what appears to be a lack of understanding of the transaction they entered into with Fortiz.

Speaking on the Citi Breakfast Show on Tuesday, Mr. Awuni who was also the Spokesperson of former President John Kufuor said every advice he gave, as far as the takeover of Merchant bank was concerned, fell on deaf ears.

“I have no desire to paint anybody or an institution bad…why would you think I will go to the court and be jostling around the court everyday…What even pains me is that the workers representatives sitting on the board did not even bother. Nobody even picked up a phone to call and ask what is it that you are looking for? We are on this board and we are your representatives [so] why is it that you haven’t come to speak to us? Tell us what exactly have you found out that we don’t know sitting on this board. Even when I make a phone call to them they don’t pick up. It was deliberate.”

When asked by host of the Citi Breakfast Show, Bernard Avle on whether the board should be held responsible for SSNIT’ss woes , Mr. Awuni said :  “the board of every organization is ultimately responsible for what happens in that organization…if a company is going to exceed its mandate the board takes control.”

Organised Labour representatives on 2009-2013 SSNIT board 

Organised Labour had four slots in the 2009-2013 board of SSNIT chaired by Professor Joshua Alabi.

They included: Mr. Kofi Asamoah, Mr. Abraham Tetteh Dian Okine, Mr. Kwame Amo-Dako and Mr. Robertson Nii Akwei Allotey.

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By: Godwin Akweiteh Allotey/citifmonline.com/Ghana
Follow @AlloteyGodwin

The post Andrew Awuni slams Organised Labour reps on SSNIT board appeared first on Citi 97.3 FM - Relevant Radio. Always.