Kenya Considers Fresh Options to Revive National Bank As Plans for Riskier Loan Falter

Dec 28, 2018 | The East African; All Africa

Kenya's National Treasury and the National Social Security Fund are in talks on how to relinquish the preference shares they hold in National Bank and the pave way for a cash call that would dilute the government's stake in the struggling state-owned lender.

If successful, the move could pave way for a rights issue to recapitalise the bank after the two major shareholders shelved a plan to inject Ksh4.2 billion ($420 million) in the form of a subordinated loan into the business. The loan proposal has been in the pipeline since 2016.
The EastAfrican has learnt that the government is wary of the proposed debt, which is riskier since it is unsecured and can only be paid after claims of secured creditors have been met in the event of liquidation of the bank.
Sources privy to the ongoing discussions told The EastAfrican that the two shareholders are currently considering the possibility of converting their preferred stocks into ordinary stocks. "The major shareholders are still negotiating and looking at various options for converting their preference shares to ordinary shares," the government source said.
Holders of preference shares in a company are given first priority in terms of compensation when a company is liquidated compared with ordinary shareholders. The bank, which is listed on the Nairobi Securities Exchange, was last week trading at around Ksh5.6 ($0.05) per share, having lost over 35 per cent of shareholder value in the past 12 months.
The National Treasury and NSSF control a 22.5 per cent and 48.1 per cent shareholding in National Bank respectively. Read more from All Africa.

Source: All Africa