CAPITAL MARKETS

CMA to set up trading platform for struggling firms

The capital market regulator has said the recovery board will allow companies to develop and implement recovery plans and ensure full compliance of listing

In Summary

•Capital Markets Authority has said it will establish a recovery board to list troubled firms.

•The recovery board is now expected to improve investor confidence and increase trading share value.

Capital Markets Authorities CEO Paul Muthaura. /FILE
Capital Markets Authorities CEO Paul Muthaura. /FILE

The Capital Markets Authority has said it will establish a recovery board to list troubled firms.

“In order to enhance investor protection, authority and the Nairobi Securities Exchange are jointly proposing the establishment of a recovery board at the exchange on which securities of an issuer who is technically insolvent, non-compliant with any other listing obligation or whose operations are being conducted in a manner that is prejudicial to the interest of investors or market integrity can be temporarily listed,” CMA said.

The move is expected to give time for the companies to improve their financial books and stand back on their feet.

This comes after the capital markets regulator has previously put several listed companies for delisting over liquidity challenges and making them trade below their par value hence reduced investors

“This will allow companies to develop and implement recovery plans and ensure full compliance with the requisite listing obligations,” CMA said.

The recovery board will be set up after the authority said delisting due would create a confidence crisis in the capital markets and send the wrong signals to potential investors.

The recovery board is now expected to improve investor confidence and increase trading share value.

Some of the companies that have been targeted before including Uchumi Supermarkets, Mumias Sugar Company, Kenya Power, National Bank and TransCentury due to declining financial performance, corporate governance issues and the rapid decline of their share prices.

Athi River Mining Cement was since in last year suspended for NSE after a high debt running into Sh14.4 billion and being placed under administration.

NBK would be saved from the platform as it will be delisted after the take over by KCB bank.

 

Poor performance of some of  the listed firms has seen the Exchange lose post an 81.9 per cent drop in its half-year profit through a trickle effect also in the wake of a challenging business environment that saw investors lose Sh90 billion.

The setting up will involve amendments to the Equities Listing and Trading Rules to facilitate the implementation of the same, CMA said.