An article that appeared in Proshare on Monday suggests that the acquisition of Mainstreet Bank by Skye Bank may not have been as transparent as originally thought.  According to the article titled “How to buy a Nigerian bank with no money”, Skye Bank may have funded the acquisition of the Bank from a loan from Afrexim bank which may have been secured by bonds accruing to Mainstreet Bank from AMCON. See excerpts

To fund the transaction, Skye Bank Plc first instituted a N30 billion Commercial Paper program to pay the deposit for the transaction. It then obtained a bridge financing of N100 billion from four banks. The bridge financing was backed using Mainstreet Bank’s AMCON Bonds that were due for redemption shortly after the closing of the transaction.

Most will consider this an act of financial ingenuity, yet it remains a classic case of in-and-out i.e. Skye Bank Plc borrows money from banks, pays AMCON, AMCON redeems Mainstreet Bank’s AMCON Bonds and Skye Bank (who now owns Mainstreet Bank) takes the cash to pay the four banks back.

The article also takes a swipe at the acquisition of Enterprise Bank by Heritage Bank suggesting it may have been funded in a controversial manner as well. Interestingly, the Chairman of Heritage Bank, Akin Akinfemiwa used to be the Managing Director of Skye Bank.

These are very strong allegations and it is surprising that as at today neither AMCON, Skye Bank or the CBN has responded officially, to the best of our knowledge, either to deny it or debunk it completely.

Last year, when Skye Bank and Amcon announced the purchase of Mainstreet, many analysts wondered how Skye Bank could have paid for such a sum. Skye Bank with a market cap of between N33b to N36billion at the time of purchase, it came as a wonder how the bank may have paid over N100 billion (rumoured price) for Mainstreet Bank. This articles now provides another spin and perhaps looks logical on the face of it.

Skye Bank (as at time of writing this article) is yet to release its 2014 Full year results as well as its 2015 Q1 results further raising up concerns amongst investors. The share price has also been depressed and has traded at under N3 in recents months as investors await any significant news from the bank.

This allegation is also a reminder of a similar rumour making the rounds in some online fora, regarding the acquisition of Intercontinental Bank by Access Bank. Many believed, Intercontinental was much bigger even though it was technically insolvent going by CBN’s reason for taking it over at the time.