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Bank Asks Court to Wind Up Oil Firm over N1.6Bn Debt

Nova

Nova Merchant Bank Limited, has urged the Federal High Court in Lagos to wind up Midwestern Oil and Gas Company Limited, for allegedly refusing to pay a N1.6 billion debt it owed.

The bank made this demand in its winding-up petition marked FHC/L/CP/2641/2023, brought under the provision of the Companies and Allied Matters Act 2020.

Apart from the suit, the bank also filed a motion on notice seeking leave of the court to “advertise the Winding-up Petition in the Federal Government Official Gazette, one national daily newspaper and other Newspaper circulating in Lagos State, where the registered office and principal place of business of the respondent is situated or in such other newspaper as the court may direct in compliance with the companies Winding-Up Rules 2001.”

The basis of the bank’s request is that the “Respondent is insolvent and unable to pay its debt or meet its obligations.”

In an affidavit attached to the suit, the petitioner claimed that upon an application by Energy Link Infrastructure Limited, Nova Merchant Bank, by an offer letter dated July 26, 2021, granted a N3 billion credit facility to the company for a project that it is undertaking for OML 18 (owned and operated by Eroton E&P).

The bank averred that the securities for the facility are an Irrevocable Domiciliation of $2 million proceeds from exclusivity agreement with Shell Western Supply and Trading Limited and Corporate Guarantee of Eroton Exploration & Production Company Limited.

The petitioner further stated that respondent “failed to offset the loan repayment at its first maturity date (25th October 2021) and asked the bank for an extension, that the Petitioner extended the credit facility by another offer letter dated 5th January 2022.

“That the Respondent covenanted its Corporate Guarantee dated 5th January 2022 as security for the 5th January 2022 credit facility granted to Energy Link, which covered the N3 billion.

“The January 5, 2022, loan facility was tenured for 180 days with 60 days of loan repayment and an interest rate of 18 percent per annum.

“Again, due to the inability of Energy Link Infrastructure to repay the loan and upon their application, the petitioner, by an offer letter dated 16th August 2023, restructured the credit facility.

“It explained further that yet again, Energy Link Infrastructure failed to pay its debt, following which the bank hired a solicitor whose fees being 15 percent of the outstanding sum as of the 28th of November 2023, is N215, 041, 211.306.

“This brought the respondent’s total Indebtedness to N1,648,649,286.68 as of the time of the institution of the suit.

“Due to the respondent’s continuous and unremitting default or inability to honour the covenants in the corporate guarantee they issued in favour of Energy Link Infrastructure Limited, the petitioner caused a Statutory Demand Letter dated 28th November, 2023 served on the respondent.

“The petitioner has given the respondent a long period to liquidate its indebtedness, and the statutory three weeks demand notice has elapsed. Yet the Respondent has neglected and refused to honour its obligations due to its inability to pay its debt.

“The petitioner states that the respondent has become insolvent due to the Respondent’s inability to pay its debt in the sum of N1,648,649,286.68 owed to the petitioner.

“The failure of the respondent to pay the petitioner the sum owed has caused great financial hardship on the petitioner,” the bank stated

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