NSSF could stall National Bank’s rights issue plan

By James Anyanzwa

Nairobi, Kenya: A disagreement on the treatment of preference shares held by the National Social Security Fund in National Bank of Kenya (NBK) could scuttle a planned rights issue.

Last year, NBK shareholders approved the bank’s proposal to raise Sh10 billion in additional capital through a rights issue.

The new capital, which was expected to help NBK set up regional subsidiaries, would involve increasing the bank’s authorised share capital from Sh3 billion to Sh7 billion through the creation of 800 million new shares.

According to Managing Director Munir Ahmed, the bank is seeking to issue 1.12 billion new shares to the existing shareholders. Monday, NBK appointed transaction advisors to spearhead the process earmarked to raise Sh10 billion.

However, a deadlock over the conversion of the bank’s preference shares held by the NSSF into ordinary shares risks delaying the process and government’s planned exit from the bank. It is now emerging that a Rights Issue can only take place if preference shares are converted into ordinary shares.

Room to divest

“This means NSSF gives up their preference shares for ordinary shares,” an analyst who declined to be named said. But NSSF has been reluctant to convert their preference shares into ordinary shares — leaving Treasury with little room to divest out of the bank.

Cabinet Secretary Henry Rotich yesterday admitted as much, saying the existence of preference shares in NBK is a source of headache as the Government plans to exit the 46-year-old lender.

“We are trying to understand the details of how the dilution of shareholding will work out,” Rotich said, adding that Treasury is still stuck because a substantial amount of shares are still held in the form of preference shares.

Another official at the National Treasury who declined to be named also said a process to raise capital; through a rights issue will certainly await negotiations over the conversion of preference shares into ordinary shares.

According to the source, the fact that the Government is not certain about whether it should take up its rights in a bank that is earmarked for privatisation or not is also one that will leave the process hamstrung.

The State earmarked NBK for privatisation but a silent war between and the NSSF over war over the 48 per cent stake the workers’ pensions body holds in National Bank has stalled the process.

The Government holds a 22.5 per cent stake in the bank and a further 48.06 per cent through the provident fund. The General Public holds the remaining 29.44 per cent.