GAT to issue first bond this week to aid undercapitalized banks

• Posted on February 25, 2019
• by Ellsamwise King
• Comment

The Ghana Amalgamated Trust (GAT) will be raising its first bond this week to help capitalize some banks that were deemed to be performing well but unable to meet the 400 million cedis capital requirement.

GAT will seek about 780 million cedis in its first tranche to help ADB bank, Prudential Bank, UMB as well as Omni and Sahel Sahara banks – which are in the process of merging.

Speaking to Citi Business News on the issue, Managing Director of GAT, Eric Otoo, explained that GAT does not have enough time since the Bank of Ghana has set a deadline.

“We hope to issue by the end of February. That is an aggressive deadline we are working with because by the end of March 2019, per the guidelines we have from the Bank of Ghana, we need to have raised the funds to make sure that the banks are properly capitalized,” he said.

The GAT is a special purpose vehicle created by government through the Ministry of Finance to support banks that were said to be doing well but could not meet the capital requirement announced by the Bank of Ghana.

The banks are ADB; which is expected to receive 127 million cedis; Omni Bank and Sahel Sahara Bank, which will both get 130 million cedis; Prudential bank, which will get 251 million cedis and UMB which will get 247 million cedis.

These banks are expected to benefit from the first tranche of the bond that will be issued this week.

The management and board of GAT are optimistic that the move will yield a good result since it has been used and tested in some developing countries.

GAT is also expected to raise the second tranche – which will be a different bond of 1.14 billion cedis – solely for the NIB also this week.

Mr. Otoo stated that GAT is expecting a coupon rate of 21 percent.

According to the management of GAT, investors are demanding a 70 percent guarantee for all the banks except NIB. which investors are seeking 100 percent government guarantee.

The GAT is expected to inject these funds into the banks as equity.

This will give GAT some controlling powers over the banks to influence its operations towards profit making.