Commercial arm’s length process used to recapitalize banks

The Chief Executive officer of the Ghana Amalgamated Trust (GAT), Eric Otoo, has disclosed that the government assisted recapitalization of banks after the banking sector crisis was carried out on a commercial arm’s length basis.

The CEO asserted that the programme was not a clandestine move by the government to acquire controlling stakes in the indigenous banks that had been recapitalized.

According to him, the GAT had operated independently of government influence with its own board, management and consultants who had been plucked from industry to assist the struggling banks.

Mr. Otoo further clarified that the banks had not been funded using debt but equity.

“What we funded the banks with is actually not debt at all. It was equity. So we negotiated with each bank. So let’s take ADB, for instance, ADB is publicly listed and traded. ADB needed an amount estimated by Bank of Ghana, about 127 million cedis, to be fully recapitalized in 2019. So we engaged ADB, we had discussions with the board, with management, ADB had advisors advising them, we had advisors. So everything was done on a commercial arm’s length basis

“And we invested equity into ADB. So for our investment into ADB, we negotiated an 11.3% equity stake. Yes, so far for ABB here the entire amount we put in was put in as equity, but to clarify further it was put in us ordinary equity. You know equity can come in various forms” he said.

He noted that “So at the time when we’re ready to exit, we’ll just sell those equity stakes hopefully back to the original shareholders and then return the funds back to it’s source which in this case is government.”

GAT”s Role In Ghana

According to the Mr.Otoo, GAT was incorporated under the Companies Act as a public limited liability company on December 17, 2018, as a special purpose vehicle (SPV) established by the Government of Ghana (GoG) to support selected indigenous banks (ADB, NIB, OmniBSIC, Prudential and UMB) over five years.

Its core mandates, he said, are; to raise funds to recapitalize the selected indigenous banks that were unable to meet the new GHS 400 million minimum capital requirements that the Bank of Ghana (BoG) set for universal banks. As part of the recapitalization, GAT owns equity stakes in the banks that it has invested in.

Not limited to that, he further revealed that GAT supports the transformation of the banks to improve governance, management, operations and financial performance to create value for stakeholders.