Mortgage firm Housing Finance set to form holding unit

Housing Finance (HF) has joined Equity Bank and KCB in setting up a holding company to run its subsidiaries.

HF will transfer its mortgage business to a proposed subsidiary as it seeks to use the company to increase investment in other subsidiaries that offer support to its main mortgage unit.

READ: KCB joins Equity in plans to form holding company

The creation of the subsidiary is pending approval of shareholders, Central Bank of Kenya and the Competition Authority of Kenya, with HF calling for an extraordinary general meeting on December 5 to seek shareholder approval for the same and also for its planned rights issue.

In a circular to shareholders, HF chairman Steve Mainda said that the move will allow its mortgage finance business to take carry on independent of other supporting subsidiaries.

Under the new arrangement, he said, shareholders will continue to own the same shares owned before the re-organisation with the stocks remaining listed on NSE.

The company plans to change its official name from Housing Finance Company of Kenya Limited to HF Group Limited.

“This allows the company the opportunity to invest capital needed to establish and grow subsidiaries engaged in providing complementary services to the group’s core mortgage finance services that would allow it to offer integrated property solutions to its customers,” said Mr Mainda in the letter to shareholders.

He said that the proposed structure supports the group’s long term ambitions of expanding in the region, given that it will be better placed to deal with regulatory requirements of multiple jurisdictions.

Each jurisdiction may be dealing with more than one subsidiary although there will be one holding company, the HF Group Limited.

CBK, the banking sector regulator, developed guidelines to allow special entities to own more than 25 per cent of the share capital of a bank.

The amendment was passed under the Finance Act of 2012, allowing banks to reorganise their structures and spread risks associated with subsidiaries and associated companies.

Before the amendment, ownership of above 25 per cent of a bank’s share capital was designated to banking firm, state corporation, government or its parastatal.

A holding company is tasked with offering financial, advisory, accounting, management and information processing services.

The strategy was first used by City Trust, an investment firm which owned just 7.28 per cent of I&M Bank, in a reverse takeover deal that saw it acquire the shares in the lender and merger of the two firms.