GAT takes 18% of ADB; Shores up bank’s capital to GH¢700m

The Ghana Amalgamated Trust Limited (GAT) now owns 18 per cent of the Agricultural Development Bank Limited (ADB).

It followed the successful injection of GH¢127 million into the agriculture-focused lender by GAT, a special purpose vehicle (SPV) that the government established in 2018 to help capitalise, restructure and boost growth in five undercapitalised but well-managed indigenous banks.

According to a press statement on the transaction, which was made available to the Daily Graphic, the private placement of ADB shares to GAT in return for the capital was completed on January 14.

Its completion has boosted the stated capital of the bank to GH¢700 million – almost double of the regulatory requirement of GH¢400 million for banks – the statement said.

The Managing Director of ADB, Mr John Kofi Mensah, told the paper on Wednesday that although the bank was not entirely new to the GAT structure, its official coming onboard heralded brighter days for ADB.

“It brings onboard some governance expertise because they have been specially formed to take up shares in special banks.

“They are going to be key in our strategies and with the addition, we expect to see big strides into agribusiness, which we have already laid the platform for,” he said.

GAT turbulence

Formed in December 2018, GAT was the government’s strategy to retain indigenous holding and jobs in the banking sector after a far-reaching reform exercise by the Bank of Ghana (BoG) led to the closure of nine banks – all of them local lenders.

The SPV was originally programmed to use a GH¢2 billion sovereign guarantee to source funds from private investors and invest same in the ADB, the National Investment Bank (NIB), the Universal Merchant Bank, the Prudential Bank and the Omni-BSIC Bank by March 2019.

However, after almost one year in action, the Trust was unable to raise the required funds due to a court case by a minority Member of Parliament (MP), Mr Isaac Adongo, challenged the legality of using a bond programme to recapitalise the banks.

The development forced the government to restructure the arrangement by replacing the bond programme with a bridge funding of GH¢800 million to GAT to invest in all the five banks minus NIB.

One source, who is familiar with the transaction, confirmed to the Daily Graphic that the GH¢127 million that the GAT used to secured 18 per cent of ADB was part of the GH¢800 million bridge funds.

No changes in management

Although the GAT arrangement allows the Trust to make changes to the board and management should it so desire, the ADB MD said the bank’s was able to get the SPV to waive those rights.

“Because we are a listed bank, our negotiations were different from other banks and, in fact, GAT themselves have said that their injection in ADB is different other banks,” he said.

Repayment

According to the a December 2018 press release that announced the establishment of GAT, the SPV is expected to recoup the investment and exit in a maximum of five years.

ADB’s MD said the board and management of the bank were well aware of the stringent requirements governing the investment and were committed to satisfying them.

On the issue of paying off the investment within the agreed period, Dr Mensah said, “we have already done the bank was analyses.”

“First of all, if you look at GH¢127 million vis-à-vis our stated capital of GH¢700 million, you notice that it is not overwhelming for you to say that ADB might find it difficult at the end of a certain period to refinance,” he said.

He explained that ADB was currently “one of the most liquid banks” in the country and that had placed the bank in a comfortable position to be able to refinance whatever debt obligation that may fall due.

“So, in terms of ability to refinance, it is not a challenge. Let’s even assume that this money is to be paid back within a year, we can even repay before the year ends,” he added.