The board of Pan-African housing financier Shelter Afrique is expected to ask for a $60 million bailout from the African Development Bank (AfDB).
Shelter Afrique’s funds, amounting to $22.4 million, are expected to run out by March.
Documents seen by The EastAfrican say that the board will meet on Tuesday to decide how to stem an imminent liquidity and capital crisis, as some of its credit obligations amounting to $23 million are due before the end of March.
“The minimum cash obligations for Shelter Afrique to meet its 2017 committed obligations stand at $81.9 million. Putting in a 15 per cent liquidity ratio will see the obligations rise to $127.9 million. Factoring in the first quarter consolidated weekly forecast, Shelter Afrique will run out of liquidity by March, 24, 2017,” the document, prepared on Monday for the board, reads in part.
The board is expected to approve a resolution seeking a minimum $60 million bailout from AfDB.
“The shareholders are requested to approve the African Development Bank bailout to the short term liquidity crisis,” the board’s paper submission to shareholder reads.
Documents show that the lender requires $67 million in new capital this year to maintain its capital adequacy ratio (CAR) at 30 per cent, after it dropped to 25 per cent last year. Last November, Moody’s rating agency downgrading the lender from Ba1 to Ba3.
“The key driver of the two-notch downgrade is the material, structural deterioration in Shelter Afrique’s credit metrics. Capital adequacy, as measured by the asset coverage ratio, has halved, compared with when we initially rated the bank in 2011,” said Moody’s.
The EastAfrican has also learnt that most of the shareholders have failed to fully pay up their capital subscription arrears from a call made in Djamena in 2013. The board is now working towards a new five-year subscription, starting this year, which is expected to be approved next week.
The documents show that the lender has received $11.19 million from the call, from an expected $127.65 million, leaving it with a deficit of $116.46 million of expected capital injection that has failed to come through in the past four years. Kenya, Nigeria and Ghana are some of the countries that have arrears of more than $10 million.
From the board’s approval this week, Shelter Afrique hopes to raise additional capital of $67 million this year, peaking to $78 million in the next three years.
Last month, the lender, through its director of legal, risk and compliance, Vipya Harawa, denied that it was seeking a bailout.
“Unforeseen investments have seen us turn to this extra-ordinary cash call, so it’s not a bailout. This additional shareholders subscription will be an investment in our strategy and not money meant to address our current existing gaps,” Mr Harawa said, adding that they were banking on shareholders to raise up to $90 million.
On Wednesday, the board announced that an audit by Deloitte into the financial impropriety allegations raised by its former finance director had shown that it required an additional impairment provision of approximately $6 million on the financial position statement of 2015.
“The final report asserts that there are instances where the operation of internal policies did not have sufficient regard for the requirement of the relevant international financial reporting standards. The Board notes this estimate with concern, but is confident that it does not fundamentally undermine the financial position of the company,” Shelter Afrique chairman Jean-Paul Missi said in a statement.