Treasury, NSSF impasse delays NBK rights issue

The Government’s plan to either merge or privatize the national bank of Kenya has emerged as the major hurdle by the bank to raise Sh13.5 billion through a rights issue.

Mooted in 2013, the bank has been unable to raise the much needed funds as its two top shareholders, the National Treasury and the National Social Security Fund failed to agree.

The NSSF, which holds a 48 percent stake in the bank, had agreed to take up its full rights and even went a step further, undertaking to underwrite untaken rights by shareholders. Before approving a rights issue, the Capital Markets Authority needs to have a guarantee that the major shareholders will take up

“Via a letter dated May 29th, 2014, to the National bank of Kenya, the board of trustees of NSSF undertook to participate in the rights issue, to underwrite any untaken rights by the existing shareholders upon completion of the rights issue,” CMA Ag Chief Executive Paul Muthaura revealed.

The move would have diluted treasury’s 22.5 percent stake in the bank, making it hesitant in participating in the rights issue.

“NSSF and the privatization commission have been unable to resolve how those shares are going to be redeemed. That is the crux of the matter and that has actually slowed down the process,” head of economic planning at treasury Dr Geoffrey Mwau said.

NBK announced plans to raise cash through a rights issue in 2013, by issuing 630 million shares valued at Sh21.50. however the impasse between the NSSF and treasury over the years may force a rethink over the rights issue, with NBK’s share having lost value.

Already treasury cabinet secretary Henry Rotich has announced that the merger of National Bank, Consolidated Bank and the Development Bank of Kenya was high on the priority list. The move is expected to create one strong bank the government investment.

The Privatization Commission is in the process of appointing a consultant to advice on the modalities of the merger.

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