Deep rifts delay NBK rights issue

Treasury has differed with the NSSF on the rate of conversion of the stock.

National Treasury Cabinet Secretary Henry Rotich with PS Kamau Thugge (centre) and National Treasury economic secretary Geoffrey Mwau (right) at Parliament Buildings on April 13, 2016. Differences between the National Social Security Fund, the Treasury and the Privatisation Commission have stalled plans for a Sh13.5 billion National Bank of Kenya (NBK) rights issue. PHOTO | DIANA NGILA |  NATION MEDIA GROUP

In Summary

• Differences between the National Social Security Fund, the Treasury and the Privatisation Commission have stalled plans for a Sh13.5 billion National Bank of Kenya (NBK) rights issue.
• Head of economic planning at the Treasury Geoffrey Mwau on Thursday told MPs that the process hit a deadlock regarding the structure of the share sale.
• The Treasury intends to convert its preference shares into ordinary shares, but has differed with the NSSF on the rate of conversion of the stock.
• The NSSF is the majority shareholder of NBK controlling 48.1 per cent shares, the general public 29.4 per cent and the Treasury 22.5 per cent.
• The NBK intended to raise about Sh13 billion by issuing 630 million shares at Sh21.5 each.

Differences between the National Social Security Fund, the Treasury and the Privatisation Commission have stalled plans for a Sh13.5 billion National Bank of Kenya (NBK) rights issue.

Head of economic planning at the Treasury Geoffrey Mwau on Thursday told MPs that the process hit a deadlock regarding the structure of the share sale.

The Treasury intends to convert its preference shares into ordinary shares, but has differed with the NSSF on the rate of conversion of the stock.

“That is the crux of matter. There has not been any agreement. That is why the process stalled,” Dr Mwau told the Public Investments Committee (PIC).

The NSSF is the majority shareholder of NBK controlling 48.1 per cent shares, the general public 29.4 per cent and the Treasury 22.5 per cent.

The Capital Markets Authority acting chief executive Paul Muthuara told MPs that the authority received an application on April 13, 2014 from Faida Investment Bank on behalf of NBK (issuer) for approval of a right issue.

NBK TARGET

The NBK intended to raise about Sh13 billion by issuing 630 million shares at Sh21.5 each.

The bank was to raise the money for expansion, to boost its capital base and transform it to a top-tier bank.

While the NSSF wrote to the CMA undertaking to participate in the issue and underwrite any untaken rights by existing shareholders upon completion of the process, the Treasury has to date not indicated whether it will uptake its rights, hence stalling the sale.

Mr Mwau, who also sits in the CMA board, said the delay was further occasioned by Cabinet decision to stop the privatisation process that had been started by the team.

“The Cabinet on April 15 directed a stop on privatisation until due diligence is conducted on risks and benefits. There is a team of consultants appointed to look on this matter,” he told temporary PIC chairman Cornelly Serem.

He said floating of additional shares to the public by NBK was further complicated by the ongoing reforms in State corporations.