By Stephen Ilungole
A couple of banks are targeting to lend to the public to acquire shares during the UMEME initial public offering (IPO), which opened on October 15 and closes on November 7.
Sources said Orient Bank was one of the banks willing to lend to potential investors to snap up the 20% allocated in the IPO to individual investors.
However, New Vision was unable to independently confirm with the bank as Gorreti Masadde, the head of corporate communications, could not be reached for a comment. New Vision could not also establish other commercial banks that could participate in lending for IPO.
However, Patrick Mweheire, the Stanbic Bank executive for investment banking in East Africa, said on Friday that the arrangement was left open to all commercial banks. Stanbic is the transaction advisor and lead receiving bank.
“We have not officially set up a syndicate of banks to lend towards the IPO.
“We have left that decision between the client and their primary bank.
“My assumption is that every bank will lend some amount based on the credit worthiness of each of their clients,” Mweheire explained.
On the tight timelines of just about three weeks of 21 days before the closure of the IPO, Mweheire pointed out that it made it unlikely, but not impossible to access debt from a bank that you have no prior relationship.
“Margin lending is still quite new to this market so it will largely be unsecured lending. As market matures and we have more IPOs, I would like to see a margin lending product that takes stock as collateral,” Mweheire said.
He noted that as rates continue to decline and Treasuries end up in single digits, it will be more apparent that owning defensive stock like UMEME is a credible investment alternative.
UMEME is offering 622,378,000 or 38.3% of its issued share capital to diversify the ownership of the utility firm and enable a reorganisation of its capital structure.
Retail buyers will take up 20%, 25% for institutional investors and 46% to foreign investors. Another 9% was given to UMEME employees and directors.