Mwalimu Sacco’s push to sell struggling Spire Bank faces an extended wait following revelations that none of the prospective bidders has passed the regulatory test.
The Sacco on Thursday wrote to members informing them that the quest to liquidate Spire Bank is still on course, but there is no viable offer yet in a process that started four years ago.
“The Sacco has given due consideration to all proposals by prospective investors in line with the regulator’s prudential guidelines,” said Mwalimu Sacco Chairman Joel Gachari.
“But so far, none has met the set criteria in terms of proof hence no concrete offer which is viable has come up worth onboarding.”
Central Bank of Kenya (CBK) prudential guidelines, for instance, require any entity seeking a significant stake in a bank to give details such as its shareholders, directors, outstanding debts and the source of funds it seeks to use in the investment.
A source familiar with the matter, who asked not to be named citing the sensitivity of the issue, said two local and two international institutions have been angling for Spire.
The local financial institutions wanted to cherry-pick the bank’s assets and liabilities, similar to what SBM did with Chase Bank, but this was rejected for fear of leaving depositors exposed.
The foreign investors, according to the source, are Hong Kong-based and Dubai-based and wanted to buy the entire bank, but their limited experience in running a bank was cited as one of the concerns.
This led to Mwalimu’s failure to pull out of Spire within its self-imposed deadline of March 31.
Mr Gachari informed members that while the Sacco still plans to offload its entire stake in Spire, the search and approval of prospective investors has to follow regulations by CBK and Sacco Societies Regulatory Authority.
He said the Sacco’s push to divest from Spire is to shield members’ investments from “perennial losses the bank continues to incur.”
“The current status quo is not only financially unsustainable for the Sacco but also not making business sense in terms of Mwalimu National Sacco stakeholders’ value proposition,” said Mr Gachari in the communique.
Spire Bank had accumulated losses of Sh9.19 billion as of September 2021 and had breached all capital and liquidity ratios.
The March 31 deadline for publishing 2021 full-year results passed without the lender making public its performance via newspapers or its website as is required by CBK rules on disclosures.
Spire wants a deal that will see it sold as a going concern as opposed to an asset purchase deal. Mwalimu is open to either liquidation or stake sale. Mr Gachari, a director at Spire and also the chairman of the bank’s committee for finance and strategy, is caught between the demands of the bank and those of the Sacco.
Mwalimu Sacco will also have to deal with a petition at the High Court seeking to stop the sale process on grounds that members stand to suffer a Sh11.1 billion hit in liquidating Spire.
A suit filed by Keneth Otieno, a teacher from Siaya County and a member of the Sacco, accused Mwalimu of failing to inform members that it would by law be compelled to inject about Sh2 billion to make Spire Bank solvent before exiting.
Mr Otieno alleges the liquidation would result in the Sacco absorbing a loss of Sh9.1 billion in shareholders’ capital.