A cloud of uncertainty hangs over holders of a corporate bond issued by Kenya’s troubled Consolidated Bank seven years ago, as it emerged that a bailout plan on which the lender has placed all its hopes has not been endorsed by Treasury.
The bank last week announced that it had applied for a Ksh1.6 billion ($16 million) bailout to help repay Ksh1.7 billion ($17 million) to its creditors. It was on the strength of this plan that it successfully applied for an extension of the repayment period of the debt, which matured on July 22, for three months.
"The last and final payment of the outstanding principal payment (together with interest for the extended period) would be made on October 22," the bank said.
"The proposal for extension of the maturity date has been made in consultation with, and in full support of the National Treasury, the majority shareholder. The extension is necessary to allow National Treasury to finalise the process of capital injection into the bank."
But the funds the state-owned lender is seeking have not been factored in the budget for the 2019/2020 fiscal year. This means that the National Treasury would have to seek the support of parliament to include them in the supplementary budget.
The lender, which is 85.8 per cent owned by the state, and which is on the market for a strategic investor, has therefore entered into a deal with its creditors to extend the repayment period to allow the National Treasury inject capital.
But Treasury says it has not received any bailout proposal.
"We have not received any request for bailout from Consolidated Bank. As far as I am concerned we have not seen it," a senior government official who is privy to the matter told The EastAfrican.
While this does not necessarily spell doom for the bondholders, it may cause more anxiety.
STAKEAttempts to seek comments from the bank proved futile as chief executive Thomas Kiyai did not respond to calls and text messages sent to his mobile phone.Consolidated Bank is one of three state-owned lenders that are on the market following years of poor performance and rising debt. Others are National Bank of Kenya (NBK) and Development Bank of Kenya.NBK is at advanced stages of acquisition by the country’s biggest bank — KCB Group. KCB received regulatory approval from the Capital Markets Authority and shareholders approved the deal to swap of 10 ordinary shares of NBK for every […]