BELOW PAR

KDIC declines American firm's offer for Imperial Bank assets

In Summary
  • The depositors body acknowledged receipt of an offer letter from Amassment Corporation but said it did not meet minimum threshold
  • The Central Bank of Kenya accepted the binding offer from KCB Group in December last year, setting stage for partial takeover

 

Imperial Bank customer, 85-year-old Sarikas Ion carries a placard during a protests outside the Westlands branch in Nairobi, May 31, 2016./FILE
Imperial Bank customer, 85-year-old Sarikas Ion carries a placard during a protests outside the Westlands branch in Nairobi, May 31, 2016./FILE

Kenya Depositors Insurance Corporation (KDIC) has turned down an offer by an American corporation for Imperial Bank assets saying it is below par.

KDIC boss Mohamud Mohamud acknowledged receipt of an offer letter from Amassment Corporation but said the offer did not meet minimum threshold.

''Yes, we received their offer letter and responded. It lacked basic requirements. The firm itself is suspect to say the least,'' Mohamud said on telephone.

 
 

Amassment Corporation wanted to assume all remaining Imperial Bank deposits amounting to Sh49.03 billion, with an equal face-value amount of loan assets including 50 per cent of the current loans in litigation.

The firm was to set up a special purpose vehicle for the purpose of assuming and holding the assets and deposits of Imperial Bank.

This includes both performing and non-performing loans, as well as physical assets obtained via foreclosure.

The new company was not to be a licensed bank or bank holding company but was to be structured as an asset management company (AMC), a resolution-type SPV registered in a domicile with a strong legal system and transparency.

According the offer, transaction was to be a debt-for-equity swap whereby the new company was to issue uncertified shares for 100 per cent full face value to depositors, giving them full recovery of 100 cents on the shilling for their deposit amounts, which would be fully backed by an equal face value of Imperial Bank assets.

Amassment was to be the sole common shareholder of the special purpose firm.

It was to pick select employees of the defunct Imperial Bank to work in the newly set up recovery firm where they were to oversee the performing assets and manage recoveries of non-performing loans.

 
 

It also wanted KDIC to contribute cash capital of 20 per cent of what it owes to remaining depositors into the special purpose firm , in order to partially compensate for value declines sustained by loan assets, litigation costs, as well as losses from non-performing loans that the new firm will assume.

A significant portion of Imperial Bank’s assets and liabilities are tied up in lawsuits and will remain with the KDIC.

In September, KDIC boss said the defunct bank's assets and liabilities have to be resolved before it is wounded up, but failed to give a defined timeline.

First we have to sort out this assets then that’s when we can know where to take this bank,” Mohamud said during an update on KCB bank’s final offer and signing of agreement to release funds.

The Central Bank of Kenya accepted the binding offer from KCB Group in December last year, setting stage for partial takeover.

KCB released funds increasing total recovery to approximately 35 per cent of original eligible deposits held at the date of receivership.

The funds were made available in three tranches, with 92 per cent of eligible depositors granted full access to their balances.

The recovery has however excluded the 50 per cent of loan assets which are linked to ongoing litigation.

In October 2015, CBK placed Imperial Bank under receivership after it emerged that it was operating two sets of books, with a potential fraud of $449 million (approx. Sh46 billion) that placed depositor funds at risk.