US embassy cable - 02ABUJA3323

UNCLAS ABUJA 003323 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, PREL, PGOV, EAID, NI 
SUBJECT: NIGERIA: LONDON CLUB DEBT BUY-BACK POSTPONED TO 
ALLOW ABACHA FAMILY TO PARTICIPATE 
 
 
1. (U) Summary: The Government of Nigeria's (GON) attempt to 
buy back $2 billion of its London Club (commercial) debt 
obligations suffered a setback Friday, December 6, when a 
court injunction sought by the family of the late military 
dictator Sani Abacha forced a postponement of the auction to 
December 20.  The Abacha family holds 23 percent of the Brady 
Bonds and other debt slated for the debt redemption scheme. 
However, these Abacha assets were previously frozen by court 
action at the request of the Nigerian government.  The 
Nigerian government and other claimants to the Abacha funds 
agreed to allow the family to participate in the buy back. 
End summary. 
 
 
2. (U) Director-General of the Debt Management Office Akin 
Arikawe told us that the Abacha family had bought their bonds 
with money taken directly from Central Bank accounts during 
the regime of the late dictator Sani Abacha.  Arikawe 
confirmed that the par bonds were part of the Abacha assets 
frozen at the request of the Nigerian government.  However, 
both the DMO and lead adviser to the buy-back scheme, 
Citigroup, appear to have overlooked the Abacha bonds when 
they planned the debt buy back.  Consequently the Abacha 
family obtained a court order enjoining the December 6 
auction and allowing them to participate.  The court granted 
their request with the acquiescence of the GON and the Noga 
family, which is headed by a Lebanese businessman who was 
formerly a business partner of Sani Abacha and part owner of 
the Abuja Hilton.  The court stipulated that the cash derived 
from sale of the instruments would be frozen in a special 
account.  The extension of the deadline to December 20 will 
also mollify other bondholders who complained about the 
non-disclosure of the Abacha bonds in the initial offer 
document. 
 
 
3. (U) According to Arikawe, the GON and Noga family decided 
it was ultimately better to include the Abacha $470 million 
in par bonds (of the $2 billion total) in the auction. 
Without such participation, the GON would not reach its goal 
of reducing London Club debt stock/servicing by 75 to 85 
percent.   Arikawe was also concerned that bond holders who 
chose not to participate in the auction would find their 
bonds linked to the Abacha bonds which by then would make up 
the preponderance of nonconverted bonds.   The value and 
status of these bonds could be linked, however 
unintentionally, to the outcome of the GON v. Abacha court 
case, opening the GON to the possibility of new court cases 
from bond holders other than the Abachas.  Citigroup had 
participated in freezing Abacha assets and -- according to 
the DMO Director General -- should have known about the 
Abacha par bonds.  Like Arikawe, Citigroup apparently somehow 
overlooked the problem when they put the prospectus together. 
 
 
4.  (SBU) Arikawe confirmed that President Obasanjo consented 
to inclusion of the Abacha bonds in the sale, even though 
this might lead to the perception the President was giving in 
to the deceased dictator's family once again.  Arikawe thinks 
it is simpler to accede to the request, rather than become 
enmeshed in another series of drawn out court cases. 
 
 
5. (SBU) Comment: Newspaper headlines about the Abacha family 
stopping the auction were undoubtedly embarrassing for the 
Presidency, especially after the late dictator's son Mohammed 
Abacha reneged on a reported agreement to return US $1.3 
billion in exchange for his release from prison and dropping 
murder charges against him.  Arikawe believes there will be 
little permanent political fallout from the delayed buy-back 
and he is likely right.  Instead of criticizing the President 
on this point, most Nigerians will focus on the bitter irony 
of the Abachas' using the judicial process to protect their 
position as a creditor and their ownership of assets 
purchased with funds stolen directly from the Nigerian 
treasury.  Nevertheless, continuous problems with the 
buy-back will hurt Nigeria's objective of reducing its 
debt-servicing burden.  Thus, a hitch-free December 20 
auction might be the kind of Christmas present Arikawe and 
the DMO are hoping for. 
JETER