KATHMANDU, DEC 08 - 2011
Vibor Bikas Bank, which is struggling with liquidity crisis, is all set to bring in a foreign partner.
The bank has signed a memorandum of understanding (MoU) with Investment Channel Limited of Hong Kong which through its associate financial institutions will invest US$ 16 million to help pull it out of its long-running liquidity crisis.
Vibor’s chief executive officer Ajay Ghimire said the Hong Kong-based investment company would make the investment in the form of a bank guarantee which would be later converted into equity capital. According to Ghimire, the move is aimed at improving the bank’s financial health.
Under the arrangement, Vibor will get US$ 8 million each from Himalayan Bank and Nabil Bank with Investment Channel providing the bank guarantee. “Almost everything has been worked out, and the process of receiving the cash is about to be completed,” said Ghimire. “After the cash injection is completed, we will start the process of converting it into equity.”
Ghimire added that one of the associate financial institution of Investment Channel would be Vibor’s equity partner. Since Nepal Rastra Bank (NRB) has required that foreign institutions involved in banking and regulated by the central bank can only become partners with local banks and financial Institution (BFIs), one of Investment Channel’s associate banks will have to be Vibor’s equity partner instead of the investment company itself.
“After investing US$ 16 million, Investment Channel’s associate bank will hold 49 percent of the shares of Vibor,” said Ghimire. “Vibor will raise capital to maintain its stake at 51 percent.” Once that happens, its paid-up capital will amount to more than Rs 2 billion.
The entry of a foreign partner has become a must for Vibor as it continued to struggle under a cash crunch even after being rescued by Nepal Rastra Bank (NRB) last year. The central bank had provided Rs 500 million to the bank under the lender of the last resort policy. Vibor plunged into an acute liquidity crunch following huge withdrawals by individual and institutional depositors.
With depositor confidence in Vibor still shaky, the liquidity situation has not improved and it has been constantly low on cash. “We did try to find domestic partners, and we even asked domestic financial institutions for acquisition, but there were no takers,” said Ghimire.
Vibor has sizable investments in the realty sector, both in the form of lending as well as its own ventures. “With the aforementioned investment, Vibor will repay the amount received from the central bank which has become due besides completing the projects that it is engaged in,” said Ghimire. “Most of our projects are in prime locations, and I am confident that they will be sold out once they are completed.” In July, Vibor signed an MoU with Bhajuratna Finance and Savings for a merger as the central bank had offered refinancing on the condition that it go for a merger within three months.
Source: Kantipur
Vibor Bikas Bank, which is struggling with liquidity crisis, is all set to bring in a foreign partner.
The bank has signed a memorandum of understanding (MoU) with Investment Channel Limited of Hong Kong which through its associate financial institutions will invest US$ 16 million to help pull it out of its long-running liquidity crisis.
Vibor’s chief executive officer Ajay Ghimire said the Hong Kong-based investment company would make the investment in the form of a bank guarantee which would be later converted into equity capital. According to Ghimire, the move is aimed at improving the bank’s financial health.
Under the arrangement, Vibor will get US$ 8 million each from Himalayan Bank and Nabil Bank with Investment Channel providing the bank guarantee. “Almost everything has been worked out, and the process of receiving the cash is about to be completed,” said Ghimire. “After the cash injection is completed, we will start the process of converting it into equity.”
Ghimire added that one of the associate financial institution of Investment Channel would be Vibor’s equity partner. Since Nepal Rastra Bank (NRB) has required that foreign institutions involved in banking and regulated by the central bank can only become partners with local banks and financial Institution (BFIs), one of Investment Channel’s associate banks will have to be Vibor’s equity partner instead of the investment company itself.
“After investing US$ 16 million, Investment Channel’s associate bank will hold 49 percent of the shares of Vibor,” said Ghimire. “Vibor will raise capital to maintain its stake at 51 percent.” Once that happens, its paid-up capital will amount to more than Rs 2 billion.
The entry of a foreign partner has become a must for Vibor as it continued to struggle under a cash crunch even after being rescued by Nepal Rastra Bank (NRB) last year. The central bank had provided Rs 500 million to the bank under the lender of the last resort policy. Vibor plunged into an acute liquidity crunch following huge withdrawals by individual and institutional depositors.
With depositor confidence in Vibor still shaky, the liquidity situation has not improved and it has been constantly low on cash. “We did try to find domestic partners, and we even asked domestic financial institutions for acquisition, but there were no takers,” said Ghimire.
Vibor has sizable investments in the realty sector, both in the form of lending as well as its own ventures. “With the aforementioned investment, Vibor will repay the amount received from the central bank which has become due besides completing the projects that it is engaged in,” said Ghimire. “Most of our projects are in prime locations, and I am confident that they will be sold out once they are completed.” In July, Vibor signed an MoU with Bhajuratna Finance and Savings for a merger as the central bank had offered refinancing on the condition that it go for a merger within three months.
Source: Kantipur
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