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Troubled Fund Manager Banks on Strategic Investor to Clean Nakumatt Mess

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Amana Capital Ltd, the troubled Kenya-based fund manager, has secured a strategic investor it hopes will pump in more funds to kick-start investments frozen by regulators to protect investors.

The company’s management said in a statement it had “invited” the strategic investor to be part of the recapitalization of the company and to “lead the future growth” as it dusts itself after choking on a bad decision to invest in Nakumatt Holdings, which owned the now collapsed retail chain.

Amana Capital Shilling Fund fell in trouble after Nakumatt went down with Ksh500 million it had had invested in the retail chain’s commercial paper. To lift itself from this hole, Amana reached out for an investor to provide the much-needed cash or risk punitive punishment from not just regulators but also the unforgiving lot of investors.

“The strategic investor is working with the current shareholders to find ways to reduce and limit the loss of funds in the Nakumatt commercial paper over the next few years,” the statement says.

People familiar with the matter say the new investor could take up to a 60% stake in Amana Capital Ltd (ACL), while unit trust holders will be asked at the 25th September AGM to take up equity, which would leave current shareholders with just  10% stake.

Staring at losses

The strategic investor is expected to pump in Ksh300 million. This comes against reports that Class B units investors who invested their money with Amana Capital’s Amana Shilling Fund (ASF) risk losing Ksh255 million, which is 59% of the total unit share value of Ksh434 million.

In a communique to investors issued recently, Amana Capital said it had impaired the amount, which was lost on paper after retail chain Nakumatt went down, where Amana Capital had invested Ksh500 million Commercial paper.

Impairment happens when estimated future cash flows from an asset are less than its book value.

“Following the directive by the Trustee, Natbank Trustee and Investment Services Limited (‘NTISL’) provisions of IFRS 9 and the regulator, CMA, the fund sponsor has impaired the gap of Kshs two hundred and fifty-five million (‘Kshs 255mn’) which represents 59% of class B units. Every unit holder will have their investments in the ASF Class B impaired by 59%,” the communique read in part.

The investors now remain with only Ksh179 million, which has been divided into two, with only Ksh16 million being redeemable.

Amana Capital Ltd’s management said redemptions would be considered after the AGM slated for 25th September. The Ksh163 million is held in fixed deposits at Kingdom Bank (formerly Jamii Bora Bank), which was recently acquired by Co-operative Bank. Amana’s Ksh434 million Shilling Fund has remained frozen for the last two years.

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“Following the financial impact on the fund occasioned by the unprecedented outcome of the Nakumatt commercial paper,” Amana Capital said in a statement on Friday, “the Board and management of Amana Capital Limited (ACL), in consultation with the Capital Markets Authority (CMA), have been working to find a sustainable solution even as the firm continues to pursue the matter through legal avenues.”

It said while the new investor will not provide the finance to repay any funds lost, it says, monies recovered from ongoing legal processes will be credited to the affected unit trust holders.

Burnt fingers

Even as Amana Capital secures strategic investor, due diligence by the Capital Markets Authority on the transaction and consultations on other concrete measures being adopted by the company is currently underway.

“The transaction with the strategic investor will also be subject to terms and conditions post the Amana Capital AGM, intended to safeguard the investor under the current circumstances,” the statement said.  

“The fund manager will seek the unit holder’s approval for the proposed transaction during the Annual General Meeting scheduled on 25th September 2020 and “allow them to offer additional options to assist in reducing the loss in the Nakumatt commercial paper.”

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LUKE MULUNDAhttp://Businesstoday.co.ke
Managing Editor, BUSINESS TODAY. Email: [email protected]. ke
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