Now Victoria bank buys top kindergarten in debt deal


Dr Yogesh Pattni chief executive officer Victoria Commercial Bank of Kenya. FILE PHOTO | NMG

Victoria Commercial Bank is set to acquires 24.89 percent stake in a top Nairobi-based Kindergarten in a debt swap deal after the school struggled to repay its loans.

The Competition Authority of Kenya (CAK) has cleared the deal that will make the bank a significant shareholder in Montessori Learning Centre Limited, situated in Westlands, Nairobi, reflecting a rare purchase of a school by a lender.

A director at the bank told the Business Daily that the deal was prompted by unpaid loan linked to the school and the reluctance to auction Montessori Learning Centre in the open market.

Central Bank of Kenya (CBK) restricts lenders from owning stakes in non-financial institutions, but offers exemption when the acquisition is a debt swap deal involving a distressed borrower.

“The Competition Authority has authorised the proposed transaction as set out herein,” said Wang’ombe Kariuki, the CAK director-general said in the latest Kenya Gazette notice.

Montessori, started in 1998, runs a British curriculum for kindergarten and preparatory school. It also offers an international diploma in early childhood education course for teachers.

Victoria Commercial Bank is a niche lender with the main focus on corporate clients and closed last year with a net profit of Sh511.9 million, down from Sh527.1 million in the previous year.

The investment in education sector will mark a major diversification from the financial sector.

Victoria, with a core capital of Sh6.09 billon, has not disclosed how much it intends to spend on the deal.

The Banking Act and CBK Prudential Guideline on prohibited business restricts banks from acquiring or holding stake in any financial, commercial, agricultural, industrial or other undertaking that is more than a quarter of its core capital.

“It would be imprudent for an institution that has been licensed to carry on banking, financial or mortgage finance business to venture into trading, or investments that may be risky thereby jeopardizing depositors’ fund,” states the guidelines.

The bank owns 24.52 percent share capital of Victoria Towers Limited, an Upper Hill building that houses its head office as well as a floor on Victoria at Two Rivers.

The remaining floors of Victoria Towers and Victoria at Two Rivers are owned by Victoria Towers Limited, an associate of the Bank.

Victoria bank mainly focuses on large corporations and high-net-worth clients, enabling it to have low loan default rates.

The lender started off as Victoria Finance Company, a non-bank finance institution but converted into a bank in 1996, following the issuance of a banking license by the CBK.

Its founder and top shareholder Kanji Damji Pattni passed on in February last year at a time he was serving as a non-executive director.