SIC Insurance, Ghana’s largest general insurer, has provided insights into a deal it entered into with Ivory Finance for the construction of affordable houses in the country about three years ago.

On 28th March, 2013, following an application for a credit guarantee by ItalConstruct International Limited, and in consideration of a letter of intent dated 28th March, 2013 indicating terms for granting a GH¢14 million loan facility from Ivory Finance Company Limited, SIC Insurance issued a GH¢19,303,800.00 credit guarantee bond to ItalConstruct International Limited in favour of Ivory Finance for a 6-month period from 28th March, 2013 to 27th September, 2013.

The loan was for the construction of affordable houses.

On 10th April 2013, Ivory Finance and ITAL executed the loan agreement to be effective for a 6-month period commencing on 11th April, 2013 and expiring on 10th October 2013.

The facility would attract a 5.5 percent interest per month and a 2 percent flat processing fee payable upfront.

The two parties agreed that repayment of the loan would be by a one bullet payment (principal + interest) at end of tenor of loan (i.e. 10th October, 2013).

Ivory Finance’s Position

The company disclosed that on 1st October, 2013, Ivory Finance made a demand on Ital and SIC.

Its position was that (i) “the scheduled repayment of the loan facility was in default as at 30th September, 2013.” (ii) “That as at 30th September, 2013, ITAL’s total indebtedness stood at GH¢18,963,894.13.”

“An important fact to note here was that there was no Guarantee/Bond cover in place as at 30th September, 2013. This was because the Guarantee issued by SIC had expired three days earlier – i.e. on the 27th September, 2013.

“Indeed, the Bond expiry date (i.e. 27th September, 2013) was indicated in the Loan Agreement.

On 18th October, 2013, Ivory proceeded to call on the Guarantee Bond.

On 22nd November 2013, Ivory Finance filed a suit to recover the Guarantee Bond amount of GH¢19.3 million and named the defendants as follows: (a) ItalConstruct International Ltd (b) Kwesi Baidoo (Director of ItalConstruct), (c) James Kwegyir Aggrey (Director of ItalConstruct), and (d) SIC Insurance,” documents of the company revealed.

Strange development

According to SIC Insurance, on 24th November, 2014 and under some strange circumstances, Managing Director of SIC, Ivory and Ital apparently agreed on and signed terms of settlement (drafted by Ivory Finance), which was filed at the Court the following day 25th November, 2014 and entered as Consent Judgement by the Court on 27th November 2014.

By those terms the defendants (as referenced above) agreed to pay Ivory an amount of GH¢91.90 million.

Ivory has been pushing for the execution of the Consent Judgement while SIC has been pushing for a stay of execution, pending full hearing into the case.

It is worth stating that earlier on 26th March 2015, and as ordered by the Court, SIC paid an amount of GH¢19.3 million (being the Bond value) to Ivory as a condition to stay execution of the Consent Judgment dated 27th November 2014 pending the decision on the application to set aside the said judgment.

SIC’s Position

There are two contracts- namely the Guarantee issued by SIC – between SIC, ItalConstruct, and Ivory Finance; Valid for the period 28th March 2013 to 27th September 2013; and the Loan Agreement – between Ivory Finance and ItalConstruct; Valid for the period 11th April 2013 to 10th October 2013.

These are different and separate contracts, and SIC was not a party to the Loan Agreement.

Default

The company averred that the event that defines default is linked to the failure to honour loan repayment terms.

As per the Term Sheet submitted to SIC on 28th March 2013 by Ivory Finance, which provided information for assessing the risk, and the decision to issue the Bond commencing 28th March, 2013, “Repayment of the loan shall be by a one bullet payment of the principal + interest at the end of the tenor of the loan”.

It also added: “As per the Loan Agreement signed between Ivory Finance and Ital on 10th April 2013, which came into effect on the 11th April, 2013 – almost two (2) weeks after the commencement of the Bond issued by SIC, “Repayment of the loan shall be by a bullet payment of GH¢19,303,800.00 made on or before 10th October, 2013.”

No default

“The Event of Default is very fundamental in this case because going by the Terms submitted to SIC Insurance, there was no default at the time the Bond expired on 27th September 2013 – as the end of tenor of loan (i.e. 10th October 2013), when an event of default may had occurred, had not come.”