The Kenyan banking subsidiary of Equity Group has borrowed a total of $165 million from the International Finance Corporation (IFC) – one of the largest single credit facilities to a local lender.
The proposed investment disclosure comes as the global financier also moves to acquire a 6.7 percent stake in the Nairobi Securities Exchange -listed firm for Sh13.9 billion, underlining the growing commercial ties between the parties.
“The proposed investment consists of a seven-year Tier 2, Basel II-compliant subordinated loan of up to U$165 million to Equity Bank Kenya Limited,” IFC said in the disclosure dated December 22.
“The investment will enhance the bank’s regulatory capital and support its lending operations to climate-smart projects and small and medium enterprises (SMEs) in Kenya.”
IFC will provide U$50 million of its own money while the balance of U$115 million will come from its partners.
Institutions investing alongside IFC enjoy the strong creditor protections that companies and countries typically accord to the global financier.
Besides being Equity’s top creditor, IFC is also set to become the bank’s second-largest shareholder after signing an agreement to purchase insurance firm Britam’s stake in the lender. The institutional investor will buy 253.1 million shares of the bank from Britam at Sh55 each based on negotiations with the insurer.
IFC will acquire 164.5 million shares of the lender directly and another 88.5 million shares through its IFC Financial Institutions Growth Fund LP.
Arise B.V., backed by institutional investors Norfund, FMO and Rabobank, is the top shareholder with an 11.99% stake in the Kenyan banking multinational.
The private transaction price represented a premium of more than 10% on the bank’s prevailing share price in the days before the deal was made public.
The announcement of the transaction has seen Equity’s share price rise towards Britam’s exit price.For IFC, the proposed investment marks a closer relationship with Equity to which it is the single largest creditor.The global financier had already lent the bank Sh21.8 billion as of December 2020, leading a list of development finance institutions that have backed the lender’s aggressive regional expansion.It was not immediately clear whether the new loan represents a restructuring of the existing credit facilities or will add to the bank’s borrowings.The transactions signal IFC’s confidence in Equity’s future growth prospects.“Equity Bank Kenya is the second-largest bank in Kenya, with total assets of U$7.2 billion as of September 30, 2021. The bank has a substantial nationwide presence in Kenya through its network of 190 […]