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Cal Bank Struggles with Rights Issue, Secures only 24.3% of its Target, but Looks to Private Placement

Cal Bank struggled to secure about 24% of its target in the Rights Issue now looks to private placement to raise the rest of the funds

Cal Bank faced significant challenges in its recent attempt to raise capital through a Rights Issue, falling well short of its target. Initially aiming to raise GH¢600 million, the bank managed to secure only GH¢145.8 million, which represents just 24.3% of its goal.

This amount is just 21.5% shy of the minimum GH¢120 million threshold set.  The right issue would have been unsuccessful and funds returned to shareholders if it had not met the GH¢120 million mark.

The bank’s urgent need for capital stems from its negative capital adequacy ratio of -9.1% and a substantial loss of 671.2 million after tax in 2023. These difficulties were created by a problematic lending transaction and the impact of the government’s domestic debt exchange programme that affected all banks.

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The Rights Issue faced complications when a major individual shareholder Daniel Ofori contested the bank in court, alleging inadequate disclosure of impairments. This legal challenge resulted in a suspension of the Rights Issue proceedings until a recent settlement allowed the transaction advisors to declare the outcome.

Despite hopes for a full subscription, many shareholders opted not to take up their rights, leaving the bank to explore alternative means of raising the remaining GH¢454.2 million through a private placement.

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Sources indicate that potential sources have been identified and the bank is optimistic about meeting its financial requirements. The private placement is linked to a South African group which is ready to invest in the Bank. If they come on board, they will dilute the shares of the existing shareholders.

In a statement to shareholders and the public, Cal Bank outlined the timeline for processing the Rights Issue, including the credit offer of shares between June 28 and July 5, 2024, with additional shares expected to be listed for trading on July 8, 2024. Refunds for unsuccessful applicants are also scheduled for the same date.

This development underscores Cal Bank’s ongoing efforts to stabilise its financial position amidst regulatory pressures and investor scrutiny.

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