Consolidated Bank of Kenya Ltd (CBKL) shareholders have approved the creation of new 175 million preference shares valued at Sh3.5 billion to be allocated to a yet-to-be identified investor as it moves to shore up its thin capital base.
Chairman Charles Iyaya says the process of identifying a suitable investor will commence immediately by putting up an Expressions of Interest (EOI) as the first stage towards privatisation.
“CBKL is implementing a balance sheet reorganisation strategy as a precursor to the implementation of a future privatisation strategy”, said Mr Iyaya. Redeemable preference shares can be bought back at the option of a company either at a fixed rate on a specified date or over a certain period of time.
The board has been given up to five years to exercise this right or lose it, unless prolonged by shareholders. Consolidated Bank has for the past two years been in search of a strategic investor without success.
CEO Thomas Kiyai says the Sh3.5 billion will help address the bank’s requirements such as compliance, funding and growth strategies.
The lender has been in breach of at least three regulatory metrics for four years due to limited capital.
The bank, 85.8 per cent owned by the Treasury, had a core capital of Sh276.57 million as at the end of September 2018, less than a third of Central Bank of Kenya’s required minimum core capital of Sh1 billion.
In nine months ended September, it booked a loss of Sh404.8 million, a worse position than the Sh301.5 million loss recorded in a similar previous period. Its total assets are 6.3 per cent above its Sh11.78 billion liabilities, having accumulated losses of Sh1.71 billion.
The bank had said in an earlier annual report that the Treasury had committed to inject bridging capital of at least Sh500 million. At the time, it said it was eying Sh1 billion from a strategic investor.
In March, the Privatisation Commission opened a tender for consultancy services leading to the privatisation of the lender, in a deal that was expected to end with a rights issue.