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Govt backs out of KCB rights issue

NAIROBI, June 23 – The government will not take up its rights in the just launched Kenya Commercial Bank rights issue after all. 

Finance Minister Amos Kimunya said this has been occasioned by a lack of funds to take up these rights due to budgetary constraints. 

"We are very confident of the bank but the only reason we are not taking up the rights, despite this being a painful decision, is that if we take up the issue we will be required to pay sh1.4 billion which we don’t have." he said. 

This then means that the government’s shareholding of the bank will reduce to about 24%. 

Kimunya’s assertion brings to an end speculation on whether the government was taking up its rights or not and what it would mean for other interested parties, with some experts arguing that it would be prudent in future if deadlines are provided for such declarations thus creating a fairer platform for all. 

With the rights issue, existing shareholders have the privilege to buy a specified number of new KCB shares at a special price within a given period.

Speaking during the launch of the rights issue, Kenya Commercial Bank Chief Executive Officer Martin Oduor-Otieno said the rights will be offered at Sh25 each at the ratio of 1 to 9. 

"This means that for any nine shares owned by an investor they are entitled to 1 more at the credited price," he explained.  

Otieno said the Sh5.5 billion targeted from the exercise will be used to expand its network with over 60 branches in the region. 

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"After a board meeting held about two weeks ago, the board decided to increase the 5 branches in Tanzania to 10,  the 2 in Sudan also to 10 and in Uganda from 3 to the same," said Otieno. 

The bank is offering to issue 221.7 million new shares to raise this additional funding making it the biggest ever rights issue in the Capital Markets. 

Interested investors will only pay for shares once they have formally acquired them. 

Speaking on behalf of the Lead Transaction Advisors -Standard and Faida Investment Consortium, Bob Karina said this has been made possible through a bank guarantee. 

"For the first time we shall allow irrevocable bank guarantees for every shareholder and therefore you will pay once you know what you have received as per your application," he explained.  

Karina said individuals who are not willing to take up their rights can trade them off. 

"If you can pay for additional rights, make arrangements with your bank, have a bank guarantee prepared and you apply for additional shares," he added.   

He said any remaining rights will be allocated on a pro-rata basis with the same applying incase of an over-subscription. 

Trading of the rights commenced Monday and is to continue to July 11th with June 18th being the last day of acceptance of payments. 

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The new shares begin trading on the 25th of August this year.

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