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A Hedge Fund Steps into Nigeria’s $9 Billion Corporate Dispute

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  • A Hedge Fund Steps into Nigeria’s $9 Billion Corporate Dispute

Nigeria potentially faces the largest financial liability in its history, and a hedge fund is coming to collect.

The legal and political drama involves a deal between the country and a tiny natural gas company that was scuttled after the sudden death of Nigeria’s president in 2010.

The company, Process & Industrial Developments (P&ID), sued and won a staggering judgment, now worth $9 billion.

But it’s spent years trying to get the country to pay that award, equivalent to almost 2.5 percent of its annual gross domestic product.

Now a hedge fund managed by VR Capital Group has taken a large stake in P&ID. And the gas company is trying to pull levers of power in the U.S. and the U.K. to make Nigeria settle or, failing that, enable the company to start seizing assets.

Two years ago, P&ID won a decision against the government of Nigeria, which reneged on an agreement allowing the natural gas company to harvest hydrocarbons.

Although lawyers for Nigeria say the company never put a shovel in the ground, a London arbitration tribunal in 2017 awarded it $6.6 billion—with more than $1 million in interest accruing daily.

To collect, P&ID, owned by the hedge fund and a firm called Lismore Capital Ltd., late last year hired lobbyists, lawyers, and a public-relations firm.

The attorneys are also trying to confirm the award in courtrooms in Washington and London, which would allow P&ID to start seizing Nigerian assets in the U.S. and the U.K.

Representatives from VR Capital, which is managed by Richard Deitz, didn’t respond to multiple requests for comment.

Dayo Apata, Nigeria’s solicitor general, said in a statement that the country “will ensure that its interests and that of the people of Nigeria are vigorously defended.”

He wrote that the arbitration panel assumed too much confidence in the success of P&ID’s project in calculating the damages, leading to an excessive award.

In a statement, Brendan Cahill, one of P&ID’s founders, said “it is disappointing that Nigeria chose to repudiate the terms of a deal that would have benefited the country by bringing electricity to millions of its citizens.” He said the company, “backed by its investors,” would pursue enforcement of the award.

VR Capital’s bet appears to be the latest example of a tactic used by investors in distressed assets.

Companies including Paulson & Co., Elliott Management, and Pershing Square Capital Management in the past several years have taken stakes in investments that few would touch, and then hired lawyers and lobbyists to change the political winds to make them succeed.

The strategy worked for Elliott and its co-investors when they won a massive settlement on defaulted Argentine debt. The outcome is less certain for some Puerto Rico bondholders and shareholders in U.S. mortgage finance companies Fannie Mae and Freddie Mac.

The Nigerian saga began almost a decade ago and is revealed through court and arbitration filings and other public documents.

Despite the country’s ample natural resources, Nigeria’s state-owned electric and petroleum companies have struggled to power the country.

To help fix the problem, in 2010 then-President Umaru Musa Yar’Adua authorized partnerships with private companies to develop the nation’s energy infrastructure.

The Ministry of Petroleum Resources struck one such agreement in January 2010 with P&ID, which was founded in 2006 by two Irishmen, Michael Quinn and Cahill.

Under the agreement, Nigeria planned to pipe natural gas from two offshore oil rigs to a refinery that would be built by P&ID.

There, P&ID would remove hydrocarbons from the gas and send the fuel to Nigerian power plants. P&ID wouldn’t get paid for the endeavor, but it could keep and sell the hydrocarbon byproducts, which themselves had value, with the government getting a cut.

The company hoped it would make billions of dollars from the arrangement while helping to provide Nigeria with much-needed power.

Quinn, in a statement before an arbitration panel, said he thought the deal would have been “the high point of my own career in Nigerian business.”

He said P&ID spent tens of millions of dollars on preparatory work before winning the agreement.

But the project never got off the ground. In May 2010, Yar’Adua, who’d been suffering from pericarditis, died.

The oil rigs couldn’t provide the volume of natural gas promised in the agreement, and, in any case, the government didn’t construct the pipeline.

After about two years of trying to resolve its dispute with the government, P&ID filed for arbitration in London, where the agreement specified disputes would be handled. The arbiters sided with P&ID.

The Nigerian government appealed the decision in London, arguing that the petroleum ministry didn’t have the authority to enter into the agreement and the arbitration panel used the wrong legal standard.

The government lost there, though it also turned to Nigeria’s court system, where it won.

Then the London arbiters came back with an award amount. P&ID never broke ground on the natural gas refinery, but said it spent about $40 million in the planning stages.

It calculated its damages by estimating the profits it believed it would have earned over 20 years had the project gone forward: about $6 billion.

Two of the three arbiters granted the enormous award. The third also said there should be damages, but set the level much lower.

At some point, the Cayman-based fund, VR Advisory Services Ltd., bought 25 percent of P&ID, according to public records. A P&ID spokeswoman declined to comment on when VR bought its stake or to identify the owner of Lismore Capital.

Last fall two firms registered with the U.S. Senate to lobby Congress and the Trump administration on behalf of the energy company.

One of them, Kobre & Kim, which also represents P&ID in the District of Columbia courtroom, has a history of attempting to enforce judgments against foreign governments.

The other, DCI Group, has made a specialty of public-relations work for Wall Street companies that attempt to use public pressure to make bets pay off. DCI in January said it had made $80,000 in fees in the fourth quarter from P&ID and lobbied the U.S. Department of State.

Black Diamond Strategies LLC, which is stocked with conservative lobbyists, has also disclosed that DCI hired it for lobbying work on P&ID’s behalf.

The battle made headlines in Nigeria, where President Muhammadu Buhari was campaigning for a second term. (He won in the February election.)

In November, when Nigerian officials visited the U.K. to pitch an offering of bonds, columnists there said Nigeria had to pay P&ID if it hoped to raise money from British investors.

This prompted some in the Nigerian press to accuse commentators of being hired to attack Buhari. Cheta Nwanze, an analyst at Lagos-based risk advisory firm SBM Intelligence, says the government should have resolved the dispute and moved on.

He says the president’s decision not to do so “has now caused a liability far exceeding any the country has ever incurred.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Government

COVID-19 Vaccine: African Export-Import Bank (Afrexim) to Purchase 270 Million Doses for Nigeria, Other African Nations

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African Export-Import Bank (Afrexim) Approves $2 Billion for the Purchase of 270 million Doses for African Nations

African Export-Import Bank (Afrexim) said it has approved $2 billion for the purchase of 270 million doses of COVID-19 vaccines for African nations, including Nigeria.

Prof. Benedict Oramah, the President of the Bank, disclosed this at a virtual Africa Soft Power Series held on Tuesday.

He, however, stated that the lender is looking to raise more funds for the COVID-19 vaccines’ acquisition.

He said: “The African Union knows that unless you put the virus away, your economy can’t come back. If Africa didn’t do anything, it would become a COVID-19 continent when other parts of the world have already moved on.
“Recall that it took seven years during the heat of HIV for them to come to Africa after 12 million people had died.

“With the assistance of the AU, we were able to get 270 million vaccines and financing need of about $2 billion. Afreximbank then went ahead to secure the $2 billion. But that money for the 270 million doses could only add 15 per cent to the 20 per cent that Covax was bringing.

He added that this is not the time to wait for handouts or free vaccines as other countries will naturally sort themselves out before African nations.

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China Calls for Better China-U.S. Relations

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China Calls for China-U.S. Relations

Senior Chinese diplomat Wang Yi said on Monday the United States and China could work together on issues like climate change and the coronavirus pandemic if they repaired their damaged bilateral relationship.

Wang, a Chinese state councillor and foreign minister, said Beijing stood ready to reopen constructive dialogue with Washington after relations between the two countries sank to their lowest in decades under former president Donald Trump.

Wang called on Washington to remove tariffs on Chinese goods and abandon what he said was an irrational suppression of the Chinese tech sector, steps he said would create the “necessary conditions” for cooperation.

Before Wang spoke at a forum sponsored by the foreign ministry, officials played footage of the “ping-pong diplomacy” of 1972 when an exchange of table tennis players cleared the way for then U.S. President Richard Nixon to visit China.

Wang, a Chinese state councillor and foreign minister, said Beijing stood ready to reopen constructive dialogue with Washington after relations between the two countries sank to their lowest in decades under former president Donald Trump.

Wang called on Washington to remove tariffs on Chinese goods and abandon what he said was an irrational suppression of the Chinese tech sector, steps he said would create the “necessary conditions” for cooperation.

Before Wang spoke at a forum sponsored by the foreign ministry, officials played footage of the “ping-pong diplomacy” of 1972 when an exchange of table tennis players cleared the way for then U.S. President Richard Nixon to visit China.

Wang urged Washington to respect China’s core interests, stop “smearing” the ruling Communist Party, stop interfering in Beijing’s internal affairs and stop “conniving” with separatist forces for Taiwan’s independence.

“Over the past few years, the United States basically cut off bilateral dialogue at all levels,” Wang said in prepared remarks translated into English.

“We stand ready to have candid communication with the U.S. side, and engage in dialogues aimed at solving problems.”

Wang pointed to a recent call between Chinese President Xi Jinping and U.S. President Joe Biden as a positive step.

Washington and Beijing have clashed on multiple fronts including trade, accusations of human rights crimes against the Uighur Muslim minorities in the Xinjiang region and Beijing’s territorial claims in the resources-rich South China Sea.

The Biden administration has, however, signalled it will maintain pressure on Beijing. Biden has voiced concern about Beijing’s “coercive and unfair” trade practices and endorsed of a Trump administration determination that China has committed genocide in Xinjiang.

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U.S. Supreme Court Allows Release of Trump Tax Returns

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President Trump Signs Executive Order In Oval Office Of The White House

U.S. Supreme Court Allows Release of Trump Tax Returns

The U.S. Supreme Court on Monday paved the way for a New York City prosecutor to obtain former President Donald Trump’s tax returns and other financial records as part of a criminal investigation, a blow to his quest to conceal details of his finances.

The justices without comment rebuffed Trump’s request to put on hold an Oct. 7 lower court ruling directing the former Republican president’s longtime accounting firm, Mazars USA, to comply with a subpoena to turn over the materials to a grand jury convened by Manhattan District Attorney Cyrus Vance, a Democrat.

“The work continues,” Vance said in a statement issued after the court’s action.

Vance had previously said in a letter to Trump’s lawyers that his office would be free to immediately enforce the subpoena if the justices rejected Trump’s request.

A lawyer for Trump did not immediately respond to a request for comment.

The Supreme Court, which has a 6-3 conservative majority included three Trump appointees, had already ruled once in the dispute, last July rejecting Trump’s broad argument that he was immune from criminal probes as a sitting president.

Unlike all other recent U.S. presidents, Trump refused during his four years in office to make his tax returns public. The data could provide details on his wealth and the activities of his family real-estate company, the Trump Organization.

Trump, who left office on Jan. 20 after being defeated in his Nov. 3 re-election bid by Democrat Joe Biden, continues to face an array of legal issues concerning his personal and business conduct.

Vance issued a subpoena to Mazars in August 2019 seeking Trump’s corporate and personal tax returns from 2011 to 2018. Trump’s lawyers sued to block the subpoena, arguing that as a sitting president, Trump had absolute immunity from state criminal investigations.

The Supreme Court in its July ruling rejected those arguments but said Trump could raise other objections to the subpoena. Trump’s lawyers then argued before lower courts that the subpoena was overly broad and amounted to political harassment, but U.S. District Judge Victor Marrero in August and the New York-based 2nd U.S. Circuit Court of Appeals in October rejected those claims.

Vance’s investigation, which began more than two years ago, had focused on hush money payments that the president’s former lawyer and fixer Michael Cohen made before the 2016 election to two women – adult-film actress Stormy Daniels and former Playboy model Karen McDougal – who said they had sexual encounters with Trump.

In recent court filings, Vance has suggested that the probe is now broader and could focus on potential bank, tax and insurance fraud, as well as falsification of business records.

In separate litigation, the Democratic-led U.S. House of Representatives was seeking to subpoena similar records. The Supreme Court in July sent that matter back to lower courts for further review.

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