Family Bank top owners to take up full rights in cash call

Corporate News

Family Bank chairman Wilfred Kiboro (left) and managing director Peter Munyiri during a media briefing at the InterContinental Hotel on Oct 22, 2014. PHOTO | DIANA NGILA 

By DAVID HERBLING

In Summary

• Uptake by majority shareholders is read as a sign of confidence and raises the chances of companies meeting or exceeding their Sh2.5 billion target.
• The cash call will see the bank offer 125 million new shares priced at Sh25 apiece. Existing shareholders are entitled to one new share for every nine held.

Family Bank is on course to raising Sh3.12 billion through its ongoing rights issue after top shareholders said they would defend their stakes.

This means that Family Bank is assured of raising at least Sh2.5 billion given that the lender’s anchor shareholders own a total 83.15 per cent stake.

“The majority shareholders have indicated they will fully take up their rights,” said Wilfred Kiboro, the bank’s chairman.

Standard Investment Bank, the transaction advisers, have set Sh1.7 billion or 55 per cent subscription rate as the success level for the rights issue.

Uptake by majority shareholders is read as a sign of confidence and raises the chances of companies meeting or exceeding their funds target.

The lender’s rights issue opened on Tuesday last week and closes on November 28.

The cash call will see the bank offer 125 million new shares priced at Sh25 apiece. Existing shareholders are entitled to one new share for every nine held.

Family Bank’s shares are currently trading at Sh32 at the over-the-counter (OTC) market following a stock split of one-for-one that was concluded last month.

READ: Family Bank stock settles at Sh32 after September split

The offer price of Sh25 per share is a 21.9 per cent discount on the current market price.

The mid-sized bank intends to use funds raised from the cash call to beef up capital, expand branches, develop new products and revamp its IT platform. The bank said it plans to grow its branch network to 100 from the current 78 outlets and attain top-tier status by 2017.

“This will fund our expansion, enhance ICT infrastructure and meet new prudential guidelines on capital,” Mr Kiboro said on Wednesday.

The Central Bank has put in place new prudential requirements raising the ratio of total capital to total risk-weighted assets by an extra 2.5 percentage points to 14.5 per cent to enable banks ride out shocks.

As at the end of August, Family Bank’s total capital to total risk-weighted assets stood at 13.2 per cent.

This is Family Bank’s second rights issue in two years following another one in 2012 that raised Sh1.2 billion.