Trading house Aiteo, which had prospered under Goodluck Jonathan’s tenure, has recently had to start making hefty repayments to creditors that had helped the firm buy the giant OML 29. Aiteo founder and CEO, Nigerian businessman Benedict Peters, is using this as an opportunity to reorganize the group.
Banks push for payments
When the firm had trouble meeting its repayments in 2016, according to our sources it renegotiated an 18-month grace period with the banks that ended in June this year. Since that date, Aiteo has had to pay out heavy sums and is understood to be trying to negotiate another arrangement. The oil firm had bought OML 29 when crude oil prices regularly peaked over $100 and the sale price matched its market value.
With the sharp downturn in oil prices halfway through 2014, the loan became unworkable. Nearly all of the trader’s revenue from the license goes straight into paying back its creditors. With production dampened by a string of attacks on its pipelines in Niger Delta and the continued lull in oil prices, Aiteo has struggled to meet its reimbursement deadlines.
Peters counters with new financiers
Peters delegates very little, except to his older brother Francis Peters who handles the firm’s relations with banks and the government. Since the beginning of the year, the group’s finances have been in the hands of Nigerian financier Razak Shittu, former head of oil & gas for United Bank for Africa (UBA), who will be looking to secure a repayment schedule.
Indeed, this unit had directly lent several tens of millions of dollars to Aiteo to purchase OML 29. Aiteo accepted to sell such a large volume to Shell that with current output levels it will still have to work with the Anglo-Dutch major’s division for nearly 10 more years. Making the noose all the more tighter, in the formula used for the sale price of OML 29 crude oil, Peters agreed to guarantee Shell a very comfortable margin estimated at more than $1 per barrel.
The firm also accepted to use Shell’s Bonny oil terminal, whose transfer rates sit at just over $2 a barrel. Shortly following the OML 29 sale, one of Shell’s main negotiators for the operation, British expert Humphrey Doody, became a board member of Aiteo. However, according to sources in Lagos, Doody was recently made to step down from this role