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Investor ready to inject Sh2b capital into troubled Dubai Bank

By Kamau Muthoni | October 27th 2015

Sovereign Financial Holding, a Netherlands incorporated financial company, announced that it was willing to inject more than Sh2 billion capital to revive the collapsed Dubai Bank (DBK).

It has emerged from documents filed before the court registry that Sovereign Financial Holding company, which has a presence in the United Kingdom, Cayman Islands and the United Arab Emirates, is ready to take up a controlling stake in the troubled bank.

Ahmed Zubedi, the disgraced chairman of the collapsed Dubai Bank, had revealed to High Court Judge Eric Ogola that he fronted for the new investor who would inject the funds needed to save his bank from liquidation.

In an interesting twist of events that may have come too late, cash proposed by the new strategic investor plus deposits held in the financial institution, are said to be sufficient capital to manage the troubled bank’s insolvency and leave it with a credit balance of over Sh3 billion.

“If the proposed injection of Sh2,214,500,000 is allowed by the defendants (Kenya Deposit Insurance Corporation and Central Bank of Kenya) and the large depositors permitted to convert their deposits into equity, the net effect would take away DBK from insolvency,” the papers filed by Richardson and David Ltd read in part.

“The new strategic investors will constitute a new board. They will also appoint a new management as their investment in Dubai Bank will constitute 95 per cent of the bank’s ownership,” Mr Zubedi said in a letter presented in court.

A search on Sovereign Financial Holding showed that the firm is a financial services entity that was specifically established to undertake the acquisition of target banks and financial institutions in emerging markets with the objective of becoming a global financial services group.

The company states that upon completion of its first round of acquisitions, it plans to list on the main board of the European Stock Exchange.

Dubai Bank was incorporated in April 2000, taking over the operations of Mashreq Bank, which was divesting from the country.

According to the status report on the financial lender, the main shareholding included two men and two entities.

Abdul Hassan Ahmed owned 25 per cent, World of Marble and Granite 18.8 per cent, Hassan Bin Hassan Trading Company 17 per cent and Ahmed Zubedi 16 per cent. The report stated that for the last five years, the growth of the bank had stagnated due to a weak management structure, poor corporate governance and lack of strategic direction.

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