Victoria Commercial Bank took a 24.89 percent stake in a Nairobi-based kindergarten as settlement for a Sh200 million loan it had lent the school and which struggled to repay the debt.
The lender revealed the financial value of the deal with Montessori Learning Centre in its latest annual report for the year ended December 2021.
The transaction was linked to an unpaid loan by the school to the bank and the reluctance to auction Montessori Learning Centre in the open market, the lender had earlier revealed.
Victoria Commercial Bank took a 24.89 percent stake in a Nairobi-based kindergarten as settlement for a Sh200 million loan it had lent the school and which struggled to repay the debt.
The lender revealed the financial value of the deal with Montessori Learning Centre in its latest annual report for the year ended December 2021.
The Competition Authority of Kenya (CAK) cleared the deal last year that made the bank a significant shareholder in the institution situated in Westlands, Nairobi, reflecting a rare purchase of a school by a lender.
“During the year, the bank acquired 24.9 percent of the issued share capital of Montessori Learning Centre at a consideration of Sh200 million,” stated the lender in the report.
The transaction was linked to an unpaid loan by the school to the bank and the reluctance to auction Montessori Learning Centre in the open market, the lender had earlier revealed.
As the economic impact of the pandemic began to bite in March 2020, fears were rife that top private schools could be driven out of business due to loss of fees, their main source of income.
Victoria says in its report, that Montessori Learning Centre’s loss after tax for 2021 attributable to the owners of the company was Sh44 million.
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.
Banks that transformed into non-operating holding companies are however free to invest in diverse sectors of the economy in addition to banking and remain under the supervision of CBK.
International diploma
Montessori, which 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 is a niche lender with the main focus on corporate clients and closed last year with a net profit of Sh466.5, down from Sh511.9 million in the previous year.
Victoria bank mainly focuses on large corporations and high-net-worth clients, enabling it to have low loan default rates.
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.
