Corporate News
Richard Lang’at, the managing trustee of NSSF and director at National
Bank. He says the redemption of preference shares will clean up the
bank’s books. PHOTO | FILE | NATION MEDIA GROUP
By DAVID HERBLING
In Summary
- In total, the government will rake in Sh5.6 billion from the restructuring exercise while the statutory workers’ retirement fund will receive Sh1.4 billion.
- National Bank is ranked 11th in size out of Kenya’s 44 banks, with 0.5 million deposit accounts, 76,000 loan accounts and a collective market share of 3.39 per cent; according to Central Bank data.
Treasury and the National Social Security Fund (NSSF)
are set to earn a windfall of Sh1.4 billion from the redemption of
their preference shares in National Bank.
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National Bank of Kenya (NBK) has agreed to pay a 25 per cent
premium on each of the preferred stocks that have a par value of Sh5
apiece – translating to a redemption price of Sh6.25 per share.
This means the Treasury will book a margin of Sh1.1
billion from the redemption of its 900 million preference shares while
NSSF will earn a gain of Sh293.7 million given that it holds a fifth of
the total preferred stocks.
“We agreed to redeem the non-cumulative preference
shares at 25 per cent premium,” said the managing trustee of NSSF and
director of NBK Richard Lang’at in an interview. In total, the
government will rake in Sh5.6 billion from the restructuring exercise
while the statutory workers’ retirement fund will receive Sh1.4 billion.
NBK’s 1.135 billion non-cumulative preference
shares were created in 2003 when long-term loans totalling Sh5.675
billion advanced to the bank by NSSF and government were converted into
equity.
National Bank shareholders in May unanimously
approved a plan to redeem the lender’s 1.135 billion preference shares
using funds from the planned Sh13 billion cash call set for end of this
year.
The Sh7.09 billion total cost of redeeming NBK’s
preferential shares accounts for more than half of the expected proceeds
from the rights issue – leaving the bank with Sh5.9 billion to fund
growth.
“This will clean up the books and the value of the
bank will go up. NSSF is ready to defend its entire rights,” added Mr
Lang’at. NBK chief executive Munir Ahmed declined to comment on the
matter.
The 25 per cent returns for the Treasury and NSSF
add to billions in dividends that the preference shares have earned the
State and NSSF since 2003.
National Bank is ranked 11th in size out of Kenya’s
44 banks, with 0.5 million deposit accounts, 76,000 loan accounts and a
collective market share of 3.39 per cent; according to Central Bank
data.
The redemption of NBK’s preferential shares is set
to mark the final chapter of the lender’s restructuring plan mooted in
1998 to deal with the huge pile of bad loans it had accumulated.
The non-cumulative preference shares issued are not
quoted on the stock, cannot be converted to ordinary stock and do not
have voting rights. However, they are entitled to a dividend negotiated
annually but capped at six per cent per year on the par value of each
share.
NBK paid a special dividend of Sh0.075 per share
(1.5 per cent) to government and NSSF as preference shareholders
totalling Sh85.1 million and a further Sh0.33 per share or Sh377.9
million for their ordinary shares for the period to December 2013
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