The Canadian company specializing in real estate financing, Westbridge Mortgage Reit, has given a formal denial to the information disseminated according to which an agreement had been reached with the Ivorian government for the takeover by the State of Côte d'Ivoire of its shares. sold in the capital of Banque de l'Habitat de Côte d'Ivoire (BHCI) following a privatization operation.

Indeed, in a note dated November 13, 2019, first unsigned, then identified as emanating from the Ivorian Ministry of Economy and Finance, published on social networks, it was announced the decision of the Ivorian government, "by mutual agreement with the buyer, Westbridge Mortgage Reit, to cancel the sale of its shares, and to regain control of the bank".

An announcement all the more astonishing as it came quite late in the evening, after the holding of a Council of Ministers (more empowered to take such a decision) whose final press release makes no mention of this alleged "agreement". .

Contacted by the Ecofin Agency, the managing director of Westbridge and also managing director of the BHCI, JD Diabira (photo), wanted to be very clear. “We [Westbridge, Editor's note] have no agreement with anyone to sell our shareholding. Anyway not yet. And we have not started discussions to this effect. We are in possession of our registered shares representing 51.6% of the shares. And with all the shareholders representing more than 96% of the shares, none has sold their shares, ”he hammered.

Clarifying "a bank hostage situation"

In an internal note addressed to his collaborators within the bank, yesterday Tuesday, which the Ecofin Agency was able to consult, the chairman of the board of directors of Westbridge, James Clayton, also wanted to be reassuring. "At the outset I want to say that neither Westbridge nor any of the other shareholders of the Bank have entered into any recent agreement with the government," he said.

Stating, however, that Westbridge did indeed write to the Ivorian government on October 28 “to seek the help of the Prime Minister to clarify the situation of dangerous hostage taking in which the bank, its employees and its shareholders found themselves”.

Through this letter, James Clayton let it be known that Westbridge was asking for the "help" of the Ivorian Prime Minister, Amadou Gon Coulibaly, "to reach a rapid conclusion which would allow either (1) Westbridge to take effective control of the Bank whose it is the majority shareholder, or (2) to start a dialogue to free ourselves and the Bank from the dangerous situation in which it finds itself”. An approach which, he points out, was also endorsed at the General Meeting of Shareholders on October 31, in the presence of the representative of the State and in the presence of observers from the WAEMU Banking Commission.

This request for an audience with the Ivorian Prime Minister, which has still not taken place, itself follows another letter sent since September 20, 2019 by Westbridge to the Ivorian President, Alassane Ouattara, to inform him of the "many and sometimes insurmountable pitfalls that are put in their way in Côte d'Ivoire, as part of the takeover of the BHCI".

“Prevent Westbridge from taking control of the bank”

This new episode adds to a crisis that has been rocking the bank for some time now. And for the leaders of this institution, all this is part of a logic aimed at preventing Westbridge "from taking effective control of the bank".

According to James Clayton, the situation of "poor governance" experienced by the bank in recent months is exceptional, in the dangerous blockage it has created. “Shareholders who are being asked for increasingly higher capital contributions are effectively excluded from the management of the Bank,” he says indignantly.

Revealing that “in fact, the BHCI is controlled and managed by individuals who are neither shareholders nor managers. As you all know today, the Minister of Finance and the Director of Cabinet of the Ministry of Finance have been in control of the management of the Bank, and have been for months already, thus creating legal confusion detrimental to the Bank and to the interests legitimate shareholders.

An audit that set fire to the powder

For the leaders of Westbridge, it all starts with the granting of the banking license authorizing a modification of the structure of the share capital. The sesame granted in December 2018 was only given to them on April 30, 2019, four months later.

Then comes a diligent audit on the past management of the bank which will have revealed 12 billion FCFA of doubtful debts, including 4 billion FCFA surprisingly coming from transactions associated with members of the Ivorian government. That is an amount of bad debts 4 times higher than what the agreement to transfer the shares of the State to Westbridge provided for. A discovery which will have carried away the former managing director, Abou Touré, himself a former member of the WAEMU Banking Commission.

“And since then, the harassment that we had until then suffered in silence has taken on very aggressive proportions and a turn. We believe that the audit investigations that we have carried out on past management are partly at the source of this recent increase in harassment, ”says a source within the bank, on condition of anonymity.

“There is a haunting on the part of some powerful men in the region about the too many hidden bad debts that the bank has accumulated during the years 2015 to 2018. They believe that these issues can serve as a political goodwill to the approach of the elections" adds the same source.

In any case, on Monday, September 16, JD Diabira received a summons to appear for a hearing under “the emergency procedure” at the premises of the Banking Commission. Two days earlier, the bank had received a preliminary report of some 357 findings and observations resulting from a “specific mission” by the Banking Commission, a mission carried out from August 22 to September 10. Despite BCEAO rules giving the Bank 30 days to respond, BHCI will be allowed only 48 hours.

Furthermore, during the hearing, neither JD Diabira, the bank's managing director, nor Abdoulaye Gbané, the deputy managing director, will have the opportunity to explain or respond to the accusations made by the Secretary General and read before the members of the Banking Commission. Curiously enough, the dismissed ex-CEO of the BHCI (and former BCEAO executive) had the opportunity to read four pages of speeches. Dismissal took place, it should be remembered, on a unanimous vote of the members of the bank's board of directors, on July 18, 2019, and which the Banking Commission presented at its hearing as a "resignation".

In addition, in October 2018, the General Assembly and the Board of Directors of the Bank approved and ratified the decision to recapitalize the bank, the first since 2009. Of the 5 billion FCFA of initial recapitalization, NSIA and Westbridge have proceeded to the subscription and release of more than 3.6 billion FCFA, which enabled the bank to be up to standard, with regard to the minimum capital standards; the first time in a decade.

However, this recapitalization, moreover insufficient, was however marred by a defect of form which risks causing its invalidation. Indeed, the absence of the auditors at the general meeting which approved the recapitalization operation is, in the eyes of the Regulator (the Banking Commission), a possible cause of invalidation. However, according to the leaders of Westbridge, “such an invalidation will call into question the entire current capital structure of the bank and all the bailout efforts that we have been carrying out for months”.

An uncertainty that is likely to discourage investors

"Along with all shareholders, Westbridge believes that the bank's liquidity problem is by no means an insurmountable problem," notes James Clayton. The bank's fundamentals remain solid and do not call into question its ability to continue to operate. On the other hand, he worries, “the question of governance and the uncertainty it generates are likely to discourage the most confident investor. It seems unrealistic to us to think that investor-owners will commit to investing in a bank that they do not control”.

As a reminder, the BHCI acquisition process began in 2017 with the decision of the Ivorian government to sell its shares in the bank's capital. The signing of the contract for the sale of the bank's shares between Westbridge Mortgage Reit and the State of Côte d'Ivoire took place in January 2018. Thus allowing BHCI to benefit from a recapitalization bringing its capital to 4.7 billion FCFA – where it seemed to stagnate since 2005 – at 10.6 billion FCFA, of which 3.6 billion FCFA was actually released.

At the end of 2018, the BHCI thus posted equity of more than 12 billion FCFA and a deterioration rate of the portfolio income below 16% against 24% in 2017, and 36% in 2015.

The capital of BHCI counts as the largest shareholders Westbridge (51.6%); SCI Demack (33%); NSIA (10%); SOMAVIA (4%) and BOAD (1%).