GHc 1.14 Billion NIB Bond Receives 100% Gov’t Guarantee
Government is to provide a 100 percent guarantee for a 1.14 billion cedis bond that will be issued under the Ghana Amalgamated Trust (GAT) to help the National Investment Bank (NIB). The bond, which will be issued before the end of February this year will be the second tranche after an initial one for four other banks under the GAT.
The Chief Executive Officer of the GAT, Eric Otoo told Citi Business the money will be injected into the NIB as equity, giving the board and management of GAT an opportunity to have some control in the affairs of NIB.
“We have designed the legal and operational system to make NIB profitable in five years before we exit,” he stressed.
Mr. Otoo explained that the bond has a five year term maturity with a 21 percent interests rate guarantee.
He added that investors are demanding 100 percent government guarantee to give them comfort and assurance in case the bank is unable to pay back.
'But I can tell you we won't get there, the system we are going to use will rather make NIB financially strong and it will be in a position to pay back the bond', he added.
He pointed out that another tranche of bond will be issued prior to or within the same period to raise about 780 million cedis for the other remaining four banks receiving capital support under the GAT.
The banks are adb, which is expected to receive 127 million cedis, Omni Bank and Sahel Sahara Bank which will both get 130 million cedi, Prudential bank which will get 251 million cedis and UMB which will get 247 million cedis.
The management and board of GAT are optimistic the move will yield a good result since it has been used and tested in some developing countries. Mr. Oto explains.
Ghana Amalgamated Trust
The GAT is a special purpose vehicle created by government through the Ministry of Finance to support some banks that were said to be doing well but could not meet the 400 million cedis capital requirement announced by the Bank of Ghana.
Government is planning to use Private Pension funds to support the banks through the bond.