Virgin Islands investor seeks to hand Dubai Bank a Sh2.2bn lifeline
Wananchi walk past a closed Dubai Bank branch in Nairobi. PHOTO | FILE
What you need to know:
A proposal by Sovereign Financial Holdings to inject Sh2.2 billion in Dubai Bank has been forwarded to the Central Bank of Kenya.
Richardson & David, which wants to stop Dubai Bank’s liquidation, says it and other top depositors are also willing to convert their deposits in the lender into equity, a move it insists could raise an additional Sh1 billion.
The liquidator Kenya Deposit Insurance Corporation, however, holds that it is too late to rescue Dubai Bank.
A British Virgin Islands company is ready to inject $21.5 million (Sh2.2 billion) into Dubai Bank in a last-ditch effort to save the lender from liquidation, a depositor claimed in court on Monday.
Supplies firm Richardson & David, Dubai Bank’s second largest depositor, Monday told a Nairobi court that a proposal by Sovereign Financial Holdings to inject Sh2.2 billion in Dubai Bank has been forwarded to the Central Bank of Kenya (CBK).
Richardson & David wants to stop Dubai Bank’s liquidation and has sued CBK and the liquidator, the Kenya Deposit Insurance Corporation.
The firm says it and other top depositors are also willing to convert their deposits in the lender into equity, a move it insists could raise an additional Sh1 billion.
The CBK shut down Dubai Bank in August, citing serious cases of parallel banking, a mountain of unsecured loans that were not being serviced, interference with client accounts and lack of a full organisational chart as provided for by the law.
“If the proposed injection of $21.5 million by Sovereign Financial Holdings is allowed by CBK and the Kenya Deposit Insurance Corporation (KDIC) and the large depositors allowed to convert their deposits into equity, the net effect would wipe out Dubai Bank’s insolvency and leave it with a credit balance of Sh3 billion instead,” Richardson & David says.
Richardson & David had saved Sh142 million in Dubai Bank at the time of its closure. Only Nakuru-based farmer Malcolm John Bell had deposited more money in the bank—with Sh156.6 million.
The CBK says the lender is insolvent to the tune of Sh4 billion and has a large amount of unsecured loans that had not been serviced for over three months as at the time of Dubai Bank’s closure.
The financial sector regulator followed the recommendation of the KDIC in calling for Dubai Bank’s liquidation barely three weeks after the bank went into receivership.
Richardson & David and former Dubai Bank chairman Hassan Zubeidi claim the decision to liquidate the lender is malicious.
But the KDIC on Monday held that neither Mr Zubeidi nor Richardson & David have shown proof that any offer has been made to acquire the bank, and that it is too late to rescue Dubai Bank.
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