Loita Capital Partners have opened discussions with City Finance with the aim of injecting over Sh160 million into the bank.

The development comes barely six months after an American investor, Workman Trust, launched its bid for a strategic partner after pledging Sh1.6 billion in new capital.

Industry insiders, however, revealed that the proposed funding is yet to be released to City Finance.

Delay in release of the money is being blamed on complex legal formalities that are not known to the foreign investor.

The funds, which are expected to come in the form of a share swap with Workman Trust, will be used to shore up the bank's equity base as well as expand its lending activities.

Conclusion of the two deals would mark a new era for the bank that has stood at the threshold of financial turmoil over the past five years.

Loita Capital Partners' proposal is, however, subject to approval by City Finance Bank board, which is scheduled to meet on January 26, 2005.

"We have just had the first meeting with the bank's managing director," Mr Martin Muthuri, Loita Capital's managing director told the The Standard.

If the deal is approved, the Pan African banking institution plans to source two banking experts from South Africa-based parent company to help oversee the acquisition process.

The experts are expected to team up with a local auditing firm to carry out due diligence of City Finance Bank's financial status.

Muthuri said the audit, whose aim is to determine the viability of the institution, would last for at least two months.

Recommendations of the auditors will form the basis upon which Loita Capital make a final decision on the proposal.

City Finance became insolvent to the tune of Sh1.3 billion and was placed under Central Bank's statutory management in November 1998.

The bank re-opened its doors to the public two years later and has been operating under an arrangement agreed between the creditors and depositors.

The scheme was to run for a period of four years to December 2003 when all payments due to creditors were expected to have been made.

Since its re-opening on April 17, 2000, the bank has continued offer retail banking services and as at December 31, 2003, it had paid all claims made under the arrangement.

With a more stable financial base, the bank hopes to embark on a process that will see it get listed at the Nairobi Stock Exchange (NSE) hopefully by the end of this year.

City Finance's deal with Loita Capital Partners is expected to broaden the bank's ownership as well as bring in technical expertise that will accelerate its return to profitability.

Loita Capital Partners is an investment-banking firm with a keen eye on Africa.

The bank provides funding for debt transactions; advisory services and raising capital for equity transactions, bank management, correspondent banking, asset management, and other corporate-oriented financial services.

Founded in 1992 by a group of international bankers, Loita has since grown into a unique pan-African group with a dedicated team of professionals from around the world.

The group originates and completes transactions across Africa from a network of company and affiliated locations and relies on this local network to share and apply best practices that are relevant to the African market.

The Pan African bank's competitive advantage derives from its ability to bridge the gap between the objectives of regional and international financial institutions and Africa's investment banking requirements.

The bank has created the optimum environment from which to originate and structure innovative solutions to meet these requirements.

In 2000, the bank acquired 35 per cent of ordinary shares in Africa Air Rescue (AAR) Credit Services.

It has since structured and arranged insurance premium financing facilities for AAR Credit Services for over Sh15 million.

On the other hand, City Finance has crafted a five-year growth plan whose aim is to return the bank to a profitability path.

Part of the strategy includes installation of automated teller machines in the bank's branches countrywide as well as increasing the volume of deposits.

The growth strategy (2004-2008) also aims at rebuilding confidence in the bank and reconsolidating its weakened clientele base.

The initiative is expected to strategically reposition the bank in a market where competition is cutthroat.

By James Anyanzwa.