Investment bank Genghis Capital (GengCap), which is co-owned by troubled Chase Bank, is looking for strategic investors to inject new capital.
The bank has been facing liquidity challenges following placement of its principal banker, Chase Bank, under receivership. Genghis had held most of its cash with Chase owing to the cross-ownership with insiders estimating the investment bank had put as much as 80 per cent of its deposits in the failed lender that has just reopened.
“They are also in the process of identifying new investors to come in to further capitalise the business,” said Capital Markets Authority (CMA) chief executive Paul Muthaura in an interview on Wednesday.
Chase Bank does not list Genghis Capital as one of its subsidiaries nor as an associate indicating that the relationship is based on common shareholders.
Zaffrullah Khan, the deposed chairman of Chase Bank popularly known as Zafa at the lender, was also the chair of Genghis Capital and the sacked group managing director Duncan Kabui a board member.
The Central Bank of Kenya (CBK) seeks to recover more than Sh8 billion from the directors of Chase Bank who had reportedly irregularly disbursed insider loans to themselves. It was not clear whether the directors’ shareholding in Genghis was part of what had been forcefully taken by the regulator as collateral for the unsecured insider loans.
In a gazette notice released last Friday, the CMA renewed Chase Bank’s investment licences despite it being under statutory management. The regulator defended the move noting the receiver managers (KCB) had given assurance of smooth operations. “We have been working with them to make sure that even in the transition period they are making sure their responsibilities are being properly exercised. We have been holding meetings with receiver managers to ensure their abilities to exercise licensed activities continue,” said Mr Muthaura.
The bank is licensed as the sole lender that can buy and sell bonds in the secondary market as well as underwrite issue of securities.
Withdrawals at Chase Bank are currently capped at Sh1 million for deposits made before it went under, limiting cash available to Genghis Capital.
The investment bank, which is also licensed to operate a trust fund, has sent out a circular to its clients stating the bulk of cash held by GenCap Unit trust fund was held by Chase Bank.
“We are working together with the fund manager, corporate trustee and the receiver manager to enable pay out to our clients. We shall advice on any material changes,” said GenCap in circular.
Investors who sell their shares through GenCap will be able to get their funds within four working days though.
Genghis was the seventh largest player in the market last year with five per cent share of equities and bonds sales.
The investment bank is also a Central Depository Agent (CDA) registered by the Central Depository and Settlement Corporation to carry out services including assisting customers with opening of Central Depository System accounts (CDS) for shares and corporate bonds held by an investor.
