Chase Bank bondholders ponder legal action after lender’s default

A Chase Bank branch in Nairobi. FILE PHOTO | NMG 

By CONSTANT MUNDA

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Summary

• MTC Trust and Corporate Services has called a meeting of the investors on August 14 to take a position on the proposed takeover of the lender in view of the Chase Bank default.
• CBK on July 6 said State-owned Mauritian lender SBM Holdings will complete acquisition of Chase (in receivership) by August 17 through local subsidiary, SBM Kenya.

Bondholders in the troubled Chase Bank will next month vote whether to take a legal action to recover Sh4.8 billion and accrued interest locked in the mid-tier lender.

MTC Trust and Corporate Services, the firm responsible for implementation of the bond (trustee), has called a meeting of the investors on August 14 to take a position on the proposed takeover of the lender in view of the Chase Bank default.

The Central Bank of Kenya (CBK) on July 6 said State-owned Mauritian lender SBM Holdings will complete acquisition of Chase (in receivership) by August 17 through local subsidiary, SBM Kenya.

In a media notice on Monday MTC Trust said it will be seeking authority and instructions from investors to pursue all enforcement actions in the event of default of the trustee deed signed between investors and the lender on April 22, 2015.

The action under consideration include demand, legal and recovery proceedings against any party it deems appropriate for recovery of the principal and interest in the bond floated in June 2015 before the bank closed on April 7, 2016.

“As trustees we have a duty which is what we are trying to do. And for that we need the backing of the noteholders,” MTC Trust managing director Madabhushi Soundararajan said on phone.

“It’s a legal matter and enforcement means in event of default, there are certain actions which the trustee is supposed to take. There’s nothing more I can tell you at this moment.”

READ: Chase Bank to tap into SBM Sh10bn bond issue

MTC, which is part of the Meghji Pethraj Shah (M.P Shah) global business empire—which is better known in Kenya through the high-end M.P. Shah Hospital—opened the Nairobi office in late 2012 to provide trust and investment advisory services to wealthy individuals and companies. The bondholders will also vote on a resolution to protect the trustee against liabilities, costs and expenses it may incur by taking the enforcement action or any steps as authorised, the notice reads.

“Each noteholder do execute an enforceable Deed of Indemnity in the form or substantially in the form issued with the notice, and to authorise the note trustee to require from noteholders such deposit of the indemnified amount as the note trustee may reasonably consider necessary to enable it to commence or continue enforcement action.