Unity Bank to Raise N270b After Sale of N400b Bad Debts

By Modupe Gbadeyanka

Bad debts worth N400 billion have been sold by the management of Unity Bank in preparation of injection of fresh capital into the financial institution by new investors having talks with the company.

Few days ago, the board of Unity Bank confirmed that it was having discussions with new potential investors interested in pumping money into the bank, which has struggled for survival lately.

In the statement issued by the lender, the ongoing talks would soon be completed and the shareholders would be informed details of the new deal to be struck with the unnamed “prospective investors.”

According to a report by Bloomberg, Unity Bank decided to clean up its balance sheet to lure the new investors.

It was disclosed that the disposal to Frontier Capital Alternative Asset Limited of the toxic assets cut the ratio of non-performing loans to near zero from almost 50 percent and helped to shore up Unity Bank’s liquidity.

Quoting the Chief Financial Officer of Unity Bank, Mr Ebenezer Kolawole, the deal helped Unity Bank to sign an agreement with a foreign equity investor that it hopes to finalise during the first half of 2019.

Unity Bank is trying to raise about N270 billion to recapitalise its operations after missing a regulatory deadline last year to bolster the amount of cash it sets aside as a buffer against potential shocks.

Formed 12 years ago out of the merger of nine lenders, Unity Bank is only beginning to recover from a 2016 contraction in the nation’s economy that caused bad debts to soar and is making “massive” progress from six months ago, according to the CFO.

“We’re on the verge of completing our capitalisation. We’re raising substantial capital that will block the hole in the bank,” Mr Kolawole said.

Frontier Capital Alternative Asset, a unit of Lagos-based advisory and investment firm, Frontier Capital Group, acquired the bad loans after making an initial payment of N6.4 billion to Unity Bank, Mr Kolawole said.

It recovered N5 billion in the first half of this year, while both companies have an agreement to share the recovered funds over the next five years, he said, declining to give more details.

The Central Bank of Nigeria (CBN) also appointed Unity Bank to administer an N80 billion credit facility for more than 300,000 rice farmers, Kolawole said.

As part of the programme, Unity Bank obtains funding from the central bank at an interest rate of two per cent and then lends this on to farmers at nine per cent, helping to boost its income, he added.