Mwalimu National Sacco has agreed to dispose Spire Bank for a song to a local financial institution and rescue itself from the woes of the cash-strapped lender.
The Sacco’s acting chief executive Mr Kenneth Odhiambo said yesterday that Mwalimu National, which owns 100 per cent stake in Spire Bank, is at the tail end of an asset purchase agreement with a local firm.
Odhiambo however said the bank, which was by September requiring at least Sh4.42 billion to comply with minimum core capital for a sound lender, may not fetch anything for the teachers’ Sacco.
“It is public information the bank has zero value. This, I have to be candid. What we are looking at is to exit without paying or meeting costs that will impair our Sacco business,” said Odhiambo in a presser.
“At this point, we are not talking about what to realise. We are saying we don’t want to put members’ money in that bank. That decision was taken and it is closed.”
Spire Bank as at September had accumulated losses of Sh9.19 billion and stayed in breach of all capital and liquidity ratios.
Shareholders’ funds stood at negative Sh2.6 billion, meaning that all the teachers’ investment in the bank has been wiped out.
Odhiambo could not divulge the name of the acquiring entity, only describing it as a “local financial institution” that is “not necessarily a bank” but was introduced to Mwalimu by the Central Bank of Kenya (CBK).
“It is a local financial institution, not a bank per se. CBK are the people that connected us to that entity,” he said. “They are a very credible institution. Their financial base is pretty strong and can absorb those financial shocks in terms of money to be put in.”
The acquiring entity has already undertaken due diligence and “now we are pretty good to go,” according to Odhiambo, who says they are now awaiting approval from CBK and Sacco Societies Regulatory Authority (Sasra).
Disposing of the lender, which Mwalimu acquired at over Sh2.7 billion in 2014 will mean no return on investment. However, the move will help save the Sacco from any further exposure.
Mr Odhiambo said the board has been in discussion with the acquiring entity on how the assets and liabilities of the loss-making bank can be taken over without hurting depositors.
“We did not want to close the bank and have depositors running after us. Our approach was to protect depositors’ interest so that we have a very quiet exit,” said Odhiambo.
That quiet exit is set for the end of this month if CBK and Sasra give nod to the deal that will pave way for a new owner of Spire Bank.
The transaction will bring to an end the link between Mwalimu Sacco and Spire Bank, which they acquired in 2014 from the late billionaire businessman Naushad Merali.
Mwalimu Sacco has maintained that their woes in the bank started after Merali withdrew his deposits worth Sh1.7 billion — at that time, equivalent of a fifth of all the bank’s deposits.
For Mwalimu, Spire Bank’s chapter is one they wish they had never written.
But now that they have, they are keen to erase it quietly. But not without scars.
A deal that was supposed to offer the Sacco tailwinds and offer lessons to other Saccos seeking to diversify their revenue streams, ran into headwinds.
Exiting the bank has not been as easy as the entry looked when on October 10, 2014, officials of Mwalimu National Sacco agreed to buy Spire Bank.
“A bank is not like a motorbike that you go to a motorcycle’s shop, buy it and you want to dispose of. There is a procedure and is so structured that it gives credence to the process,” said Odhiambo.
In addition, Mr Otieno, who has filed the suit alongside advocate Joshua Nyamori, alleges Mwalimu Sacco is acting in contravention of the process of winding up a company.
He says Mwalimu Sacco misled its national delegates into passing a resolution to wind up Spire Bank yet the lender and its directors had not made the “requisite resolution to wind up and, or, the statutory declaration to wind up the company.”
According to the suit, transactional advisors have warned Mwalimu Sacco against liquidation and advised that either it secures a strategic investor or pump in additional money to save members from the Sh9.1 billion investment loss.
Mwalimu Sacco had hoped to exit Spire Bank by end of the month but has remained tight-lipped on the local financial institution that is seeking to take over the bank.
Exiting the bank has not been as easy as its acquisition looked when on October 10, 2014, officials of Mwalimu Sacco agreed to buy Spire Bank - as recently alluded to by the Sacco’s acting Chief Executive Mr Kenneth Odhiambo.
“A bank is not like a motorbike that you go to a shop, buy it and you want to dispose of. There is a procedure and is so structured that it gives credence to the process,” he said.
Mr Odhiambo said the Sacco was looking at exiting “without paying or meeting costs that will impair our Sacco business.”?