Troubled Shelter Afrique set for Treasury’s bailout

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The housing financier says Kenya, Nigeria and Ghana have jointly pledged to inject about $25 million (Sh2.6 billion) into the business.
The firm on Friday announced a near doubling of its provisions for doubtful debts to Sh1.85 billion following restatement of its non-performing loans.
The concerted shareholder bailout comes as Shelter Afrique reported that its full-year net loss position had worsened by 156 per cent to Sh12.7 billion as of December.

The Treasury has committed to bail out Shelter Afrique which has embarked on a clean-up of its books after a forensic audit unearthed accounting irregularities at the mortgage lender.

The housing financier says Kenya, Nigeria and Ghana have jointly pledged to inject about $25 million (Sh2.6 billion) into the business to enable it finance its cash obligations and meet liquidity ratio requirements.

Shelter Afrique on Friday announced a near doubling of its provisions for doubtful debts to Sh1.85 billion following restatement of its non-performing loans.

Kenya is the largest shareholder of Shelter Afrique alongside other African governments with an 11.16 per cent stake, second to the African Development Bank’s (AfDB) majority share of 22.7 per cent.

Shelter Afrique recently received Sh278.1 million from Cameroon, Sh360.5 million from the African Reinsurance Corporation and Sh2.9 billion from the AfDB following a shareholders’ bailout agreement.

“Kenya is expected to send their share by the end of June,” Shelter Afrique’s chief finance officer Ray Davies said in an interview on Friday.

“I am however not at liberty to divulge just how much of the $25 million will be coming from them (Kenya).”

The concerted shareholder bailout comes as Shelter Afrique reported that its full-year net loss position had worsened by 156 per cent to Sh1.3 billion as of December.

A review of the lender’s Sh29.2 billion loan book led to an upward review of loan impairment charge to Sh1.85 billion, a steep increase from the previous year’s Sh962.5 million.

An audit of the firm’s books by Deloitte last year raised the flag on inadequate loan loss provisions, queries on loan swaps for non-performing loans, and discrepancies on its loans software platform.

In 2015 Shelter Afrique posted a net profit of Sh218.7 million and recorded its doubtful loans provisions as Sh234.5 million. Its restated accounts, released Friday, now show a net loss of Sh509.2 million during this period while loan impairments stand at Sh962.5 million.

“We have reviewed our provisioning policy. Now, any account which is not performing for one year is recorded as doubtful with a provision of between 20 and 50 per cent depending on the outstanding amount,” said Mr Davies.

“We intend to aggressively pursue the doubtful debts from the developers we have financed. We have already beefed up the recovery unit to ensure this happens.”