FINANCE Bloomberg Businessweek March 11, 201923KOLA SULAIMONA/AFP/GETTY IMAGES
○ A money manager bets on a
company that’s won an arbitration
award worth billions of dollarsNigeria vs. the
Hedge Fund
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 bil-
lion. 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 com-
pany 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 agree-
ment 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 man-
aged by Richard Deitz, didn’t respond to multiple
requests for comment. Dayo Apata, Nigeria’s solic-
itor 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 ben-
efited the country by bringing electricity to millions
of its citizens.” He said the company, “backed by itsinvestors,” would pursue enforcement of the award.
VR Capital’s bet appears to be the latest exam-
ple 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 elec-
tric and petroleum companies have struggled to
power the country. To help fix the problem, in 2010
then-President Umaru Musa Yar’Adua authorizedpartnerships 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 Nigerian
President Buhari,
recently reelected