Abacha link disrupts Nigerian bond plans

By Arkady Ostrovsky in London and Michael Peel in Lagos, December 6, 2002

A $2bn Nigerian bond restructuring was thrown into chaos last night after it emerged that a portion of the bonds is held by people connected to the family of the former dictator General Sani Abacha.

The turmoil was created by recent High Court orders in London which revealed the link between the bonds and the Abacha family, which is subject to a number of international inquiries into alleged money laundering.
The potential problems with the restructuring could endanger Nigeria's credibility with commercial creditors who have always been paid in full, despite repeated defaults on debts to foreign governments.

Citigroup, the US bank, which has been hired by the Nigerian government as adviser, was considering last night the legal implications of a High Court injunction that prevents any dealing in the bonds held by the Abacha family.
Last night the Nigerian government said it was extending the restructuring offer, but made no mention of the Abacha affairs.

Last month Nigeria launched an offer through Citigroup to buy back $2bn worth of its commercial Brady bonds in an effort to restructure its unsustainable debt burden.
Nigeria, which is suffering from a steep decline in oil revenues, announced the bond buy-back after it said it might struggle for the first time to pay its commercial creditors. The country is already in default on $22bn (£14bn) worth of Paris Club debt, owed to sovereign lenders, and is struggling to service its $3.5bn London Club private debts, including the Brady bonds.

It is understood that Abacha family members have tried to tender their bonds as part of the restructuring.

According to Citigroup, the High Court's most recent order of December 4 permits these bonds to be tendered under certain conditions, provided that any proceeds remain subject to existing restrictions on the Abacha family's assets.
The US bank said it had contacted "relevant" UK regulators over the problems with the bond restructuring.

"The Abacha matter is in the hands of the High Court and Citigroup will work closely with the UK regulators to ensure that the resolution of this matter is handled completely appropriately. Citigroup would never knowingly facilitate money laundering," Citigroup said.

President Olusegun Obasanjo, whose election in 1999 ended 15 years of army rule, set as a high priority the recovery of funds allegedly looted by Gen Abacha and his relatives and associates.