NSSF, Treasury row stalls Sh13bn NBK rights issue

Differences between the NSSF, the Treasury and the Privatisation Commission have stalled plans for the Sh13.5 billion National Bank of Kenya (NBK)'s rights issue.

The head of economic planning at the Treasury Geoffrey Mwau yesterday told MPs that the NBK majority shareholder, the National Social Security Fund (NSSF), the Treasury and the Privatisation Commission have 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 the 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 CEO Paul Muthuara told the MPs that the CMA received an application on April 13, 2014 from Faida Investment Bank on behalf of NBK (issuer) for approval of a right issue.

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 into a top-tier bank.

READ: Treasury withdraws Sh4.9bn set aside for NBK rights issue

Also read: NBK shelves expansion to preserve capital

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

Mr Mwau, who also sits on the CMA board, explained that the delay was further occasioned by a cabinet decision to stop the privatisation process which had been started by the commission.

He told MPs that the Privatisation Commission had undertaken significant work in privatising the NBK.

Risks and benefits
“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 into this matter,” he told temporary PIC chairman Cornelly Serem.

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

“Since 2014, we have been undertaking parastatal reforms where some will be merged and others will remain. There was a proposal to merge three banks-Development, Consolidated and NBK where the government holds majority shares. From that standpoint, it was agreed that the privatisation process be put on hold ,” Dr Mwau said.

He said the Privatisation Commission was in the process of procuring a consultant to merge the banks.