A fresh storm is brewing within the teachers’ Mwalimu Sacco over the planned sale of cash-strapped Spire Bank as new details show that the tutors could get a raw deal in the much-hyped transaction.
The elephant in the room is that about 100,000 teachers are poised to sign a hasty contract that could see the country’s largest Sacco lose Sh11 billion in assets and maybe put its future to test.
Early last month, Mwalimu Sacco CEO Kenneth Odhiambo confirmed that they had reached an agreement with an undisclosed financial institution to buy the bank. He said the Sacco executives were waiting for approval from Sacco Societies Regulatory Authority and the Central Bank of Kenya to close the deal.
He made the declaration days after a delegates’ meeting where the Sacco affirmed its commitment to sell the troubled lender and exit non-core businesses.
But even as the Sacco pushes for the asset purchase agreement that would see interested buyer take over Spire Bank’s assets and liabilities, some members are determined to stop the sale.
In a case pending at the High Court, Keneth Odhiambo Otieno, a teacher from Siaya County and Joshua Odhiambo Nyamori, a lawyer by profession, are challenging the legality of the purchase agreement.
In court papers, the petitioners argue that Mwalimu Sacco is not concerned about protecting the interests of members.
According to the duo, the deal will see teachers not only lose their bank for a song but also force them to pay the mysterious “buyer” a further Sh11 billion.
The Sacco, Otieno details, 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,” reads court papers.
The petitioners further allege attempts by the Sacco executives to arm-twist the banks’ leadership with threats of closure unless the directors issue a statutory declaration of solvency, key in closing the deal.
Apparently, the board of the bank has declined to sign liquidation papers due to lack of money to cover all its liabilities.
According to the petitioners, their hope is that when the teachers finally decide to sell their bank, the sale should be conducted in a lawful, open and transparent manner, with full disclosure to the teachers and the public, to enable the teachers make the best bargain from various offers in a free market and to protect the public from a bank run, as happened in 2015 during the takeover of Chase Bank Limited.
On March 25, the 1st and 2nd petitioners failed to obtain stay orders halting the sale.
Justice F. Ochieng of Kisumu High court stated that it would be extremely prejudicial to all parties to stop ‘a process that has been ongoing, when it is nearing the end, and when there is no obvious violation of the law’.
However, the judge also stated that liquidation has not been triggered.
“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.
The matter will be mentioned on April 11, 2022.
Some of the companies said to have expressed interest in acquiring the bank include Dubai-based Singaporean fund and 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.
The bank is also reported to have received an offer from a group tycoons from Murang’a.