Commonwealth Development Corporation (CDC) Group, the United Kingdom’s development finance institution recently announced its decision to sell its remaining 9.97% stake in the troubled dfcu bank. The shareholding was sold to IFU, the Danish development finance institution.
CDC made its first investment in DFCU in 1964 as a founding partner to the bank and has played an integral role in its long-term growth over the last six decades, through a number of equity and debt funding rounds.
The British Fund which made its first investment in DFCU in 1964 as a founding partner to the bank started getting rid of its shares in the bank over the last six years – from 60% to 15% in 2013 and then to just under 10% in 2017
“Our partnership with DFCU has perfectly demonstrated our credentials as a provider of patient capital. And I am delighted that in IFU, we are passing the baton to a like-minded investor that, alongside Arise, the largest existing shareholder in DFCU, will be as equally committed to DFCU’s long-term stability and success,” said CDC’s Chief Executive, Nick O’Donohoe
“DFCU is now a stalwart of the Ugandan economy so we felt it was the appropriate time to deploy our capital elsewhere. Uganda is an incredibly important country for CDC and we look forward to the opportunity to reinvest the proceeds from the sale of our DFCU stake into other businesses here.”
According to our Spy, Dfcu bank’s major shareholders are said to be unhappy with the bank’s business and are interested in detaching from the bank.
The Bank is also grappling with multi billion suit from the Ruparelia Group for illegally seizing 48 properties which Crane Bank had leased from Meera Investments Limited.
Dfcu Bank has also been cited in numerous land grabbing scandals, especially those involving tycoon Godfrey Kirumira. Watch the space……
Sour relations and trouble started when Dfcu fraudently took over Crane bank in January 2017.
A statement released by the central bank and signed by its governor stated that Crane Bank was placed under receivership on Tuesday, 24 January, after which it arranged a merger with DFCU Bank.
DFCU’s Board of Directors approved the transaction on Wednesday, 25 January, according to a regulatory announcement issued by the bank, which was listed on the Uganda Securities Exchange.
“A Purchase of Assets and Assumption of Liabilities Agreement between the bank and BoU was signed on 25 January 2017,” the DFCU statement added.
Bank of Uganda said that an audit of Crane Bank carried out after it took over confirmed that “Crane Bank’s liabilities, as at the 20th October 2016, being the date of take over, grossly exceeded its assets and that it was insolvent, which insolvency has continued to date.”
June 30, 2017, BoU filed a suit against Sudhir and his Meera Investments Limited on allegations that they fleeced Crane Bank Limited of Shs397 billion which the businessman said was in breach of clause 12 of the Confidential Settlement and Release Agreement (CSRA) that was reached by both parties after BoU closed and liquidated CBL for allegedly being undercapitalized.
However, Justice David Wangutusi, dismissed the case, agreeing with the submissions of Sudhir’s lawyers and ordered that BoU pays costs of the suit.
“The person (petitioner) should pay cost and that is non other than Bank of Uganda because Margret Kasule filed on behalf of Bank of Uganda. They knew Crane Bank was in receivership as it wasn’t in existence but they went ahead to sue it” read the judgement.
The clause stipulates that, “Without prejudice to the immediate forging should any legal or administrative proceeding of any kind ensue against SR [Sudhir Ruparelia] as defined in the agreement, the agreement stands voided and BoU shall immediately return to SR the value of the settlement.”
The Report of the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) on Special Audit Report of the Auditor General on Defunct Banks that was presented to parliament blamed Bank of Uganda (BoU) officials for causing a financial loss to Crane Bank Limited (CBL) as well as the central bank itself.
Castigated BoU for its decision to ‘lent’ Dfcu bank Shs200 billion of CBL’s total loan book of Sha500 billion, which they said caused CBL a loss.
In specific reference to the sale of Crane Bank, the MPs also found “The principles of legality therefore were highly compromised. This is exacerbated by the absence of minutes or any record detailing the process of arriving at the figures,” observed the MPs, further adding that failure to value the assets and liabilities of Crane Bank before selling it to Dfcu was “imprudent”.
“The inevitable conclusion therefore is the BoU did not know the exact assets and liabilities it was disposing off. The reliance by the Central Bank on the due diligence undertaken by an interested party and eventual purchaser to purport to determine the value of assets and liabilities was imprudent and an abdication of statutory responsibility.”
The MPs also found that BoU sold CBL without the authority of the board, although the board later turned around to approve the decision, a decision MPs said was an abdication of its fiduciary responsibility.