Fresh storm rocks Spire Bank sale
Once upon a time, executives of the teachers-owned Spire Bank were taught how to crunch numbers. Now they want to return a lesson to teachers on how to calculate themselves out of an intractable situation, leaving everyone but the educators in the equation.
About 100,000 tutors are about to be committed to a quick deal that will see the country’s biggest sacco stare at Sh11 billion deletion of its assets and possibly test its survival.
Seven years ago, teachers were duped into buying Equatorial Commercial Bank but now a case seeking to halt the transaction has revealed that they may have been yet again talked into endorsing a deal they do not fully understand.
The asset purchase transaction will see Mwalimu Sacco pay a large local buyer billions of shillings because Spire Bank’s admitted liabilities exceed its assets.
Court papers filed by Kenneth Otieno, a teacher from Siaya county show that Mwalimu sacco will be forced to write off Sh9 billion from their assets and re-capitalise the bank to a tune of Sh2 billion before it can be wound up.
“Mwalimu Sacco is not concerned at all in protecting the interest of their members and the depositors for non-disclosure of material facts misleading their national delegates into passing a resolution for voluntary winding up of the bank without informing them of the immediate financial implications in the sum of Sh2 billion as well as the absorption investment in the bank of Sh9 billion into Spire Bank’s books of accounts,” the suit reads.
Sources within the bank say the deal is being rushed through leaving good money from alternative bids that could see teachers sell the lender to a strategic investor instead of the defiant idea of killing it and tearing up its banking licence.
Spire Bank has several suitors on the table including recent overtures by a Dubai-based Singaporean fund.
Others include a Hong Kong Stock Exchange-listed Chinese technology company with a market cap of $1.4 billion (Sh140 billion) that was last year licensed by the Central Bank of Kenya to purchase a local microfinance bank.
Another offer is from a group of local tycoons — representing Murang’a old money and political connections— who have also tabled an offer to purchase the licence on a going concern basis.
But the bank is being sold off as a matter of urgency even though it has been illiquid, below Central Bank of Kenya’s liquidity ratios for years.
The source says the deal is being pushed through because it favours everyone but the teachers, who have no one to tell them they are being fixed.
Signing the rushed deal would deal a court process challenging it a death blow as fait acompli -after the fact, and would let everyone off the hook but teachers.
The buyer of nearly Sh3 billion in assets, a renowned local bank, will make a bargain paying just a third of the value of the books which is performing and with their ability to collect dud loans that saw them cut their own NPLs last year in quintuple billions will cream off what is left of Spire Bank books as free money.
The regulators will solve a delicate case that had put them against a political constituency of teachers, parliamentary summons, and even phone calls to the State House by liquidating the bank amidst whispers about alternative options from local businessmen and foreign funds that could have spared Teachers further pain.
But for Mwalimu Sacco the pain will be felt for years to come, a gaping hole in its books enough to sink it cannot be wished away.
However, the sale is not conclusive yet after Alego Usonga MP Samuel Atandi dragged Mwalimu Sacco to a parliamentary probe.
Mwalimu Sacco is appearing before the Finance Committee today to shed light on the deal pilling pressure on the Sacco to slow down on signing off the two-pronged transactions of asset and liabilities to a local bank and voluntary liquidation of the shell that will remain on paper.
The sale could also be complicated by Mr Otieno’s suit which although did not expressly obtain a stay order, the courts acknowledged the local bank will have a problem closing the deal.
Part of the orders issued by Judge F. Ochieng of Kisumu High court is that it would be prejudicial to stop the process which is at the tail end when no law has been violated.
However, the judge also says that liquidation has not been triggered and that the bank has confirmed that Mwalimu Sacco cannot wind up Spire Bank.
“For the record, there is no process of liquidation that has begun for the purpose of winding up or liquidating Spire Bank. Spire Bank has conceded and the court reiterates that Mwalimu Sacco cannot cause the winding up of Spire Bank Ltd,” Judge Ochieng said.
What is in contention is that Teachers have to demonstrate they have money to pay the local buyer for liabilities that will occasion after the sale and it looks as if they haven’t even come up with the money yet.
Sign liquidation papers
Sources indicate the bank board has refused to sign liquidation papers because there is no money in its coffers that can cover all its liabilities.
The directors of a company that wants to file for voluntary liquidation must file a statutory declaration that states that the company will be able to repay its debts over 12 months accompanied by a statement of the company’s assets and liabilities.
Reluctance to give such assurance is an indication of the dire straits at Spire Bank.
Revelations in court papers seeking to stop the deal show that Mwalimu Sacco and Spire Bank management may be at loggerheads over how to proceed with the liquidation without the funds.
Reading from the suit prayers to stop the sacco from “coercing, cajoling exercising undue influence and arm twisting the banks with threats of closure unless the directors issue a statutory declaration of solvency,”
Teachers are looking at a vicious cycle, in this nightmare, but if caught napping again they may just have nodded to buying a bad bank, pumping billions of shillings to support it, wiping out Sh11 billion from their assets; just to sell Spire Bank for a song.