By Ademola Alawiye

Monday, 8 Nov 2010

Deposit Money Banks may need more time to finalise their recapitalisation deals, investigation by our correspondent has revealed.

Our correspondent gathered on Saturday that some of the banks rescued by the Central Bank of Nigeria were far from sealing deals with institutional investors.

A top official of one of the banks that passed the CBN’s stress test, said that bidders were still carrying out due diligence on some of the rescued banks, adding that it might take more time than expected for the banks to recapitalise.

The source said, “The problem is not getting bidders for the banks but some of them have backed out because the terms were probably not favourable. Some of the discussions have reached advanced stages but the problem is reaching an agreement.

“It is important to note that the most critical step for us is to bring the shareholders‘ fund to zero level from negative. If the shareholders‘ fund is grown to zero level, the banks will look more attractive to the bidders. But as it is now, not all banks can finalise their recapitalisation deals by the end of this year.”

A senior executive of one of the rescued banks also told our correspondent that “we have not concluded on recapitalisation. So many rough edges must be smoothened.”

The CBN had rescued nine banks deemed to be undercapitalised in a $4bn bail-out last year and has since been seeking new investors to recapitalise them.

The CBN Governor, Mr. Lamido Sanusi, had said that the apex bank received good bids for some of the rescued banks put for sale but it would not sell them without due consideration so as to protect the interest of shareholders.

Sanusi had said, “A number of foreign banks and private equity companies have expressed interest in the banks. We are being savvy with the biddings to protect shareholder value and, therefore, not every bid will be accepted.

“Some of the bids are very good; some are acceptable, given where we stand. Given that we have the Asset Management Corporation of Nigeria and they can recapitalise the banks, we can get a better deal, so we don‘t have to accept every offer.”

Already, there are indications that Union Bank Plc, Finbank Plc and Bank PHB Plc have begun recapitalisation talks with core investors.

Union Bank said recently that it was in exclusive recapitalisation talks with a core investor. Its spokesman, Mr. Francis Barde, was reported as saying, “Out of the multitude of investors, one has been identified for further talks.”

Reuters quoted sources as saying that the bank’s talks were with a local private equity firm interested in taking a stake, potentially in conjunction with a consortium.

Sanusi was also quoted by CNBC as saying, “Union Bank had confirmed that it was in exclusive talks. I don‘t think it‘s going to take a long time and the market will be given information as time goes by. There is certainly one firm talking to them. There are reserve bidders in the pipeline but I do think they are going to close the deal.”

The Nigerian Stock Exchange announced last week that Finbank was in talks with a potential strategic investor about recapitalisation.

According to Reuters, the bourse said in a notice, “The bank has notified the Exchange that it has entered into negotiations with a potential strategic investor which, if successful, could lead to the recapitalisation of the bank.”

It said CBN advisers had recommended a preferred bidder to acquire Bank PHB, while sources said that First City Monument Bank had made a bid to acquire Finbank.

It quoted a source at FCMB, who asked not to be mentioned, as saying, “We have made a bid. I think ours is the preferred bid but we have not been announced as the winner yet.”

The apex bank, on a rescue mission for the banking industry, had injected N620bn to shore up the fortunes of eight ailing banks and save them from imminent collapse.

Source: Punch