Mystery of Sh500m lost in KCB-Equity City Hall loan swap
City Hall may have lost Sh500 million during the transfer of a Sh5 billion loan from Equity Bank to KCB, a committee of the county government was told on Wednesday.
Nairobi county executive committee member for Finance Gregory Mwakanongo told the Public Accounts Committee led by Robert Mbatia that Nairobi had spent Sh3.3 billion to transfer the loan.
Equity Bank general manger for legal affairs John Njenga, however, told the committee that the bank only received Sh2.8 billion from the takeover, raising questions on how the balance was spent.
“We can confirm that Sh2.8 billion is the amount we received from KCB and our facility was satisfied,” said Mr Njenga.
Mr Mbatia said City Hall had indicated that the county would only lose Sh38 million negotiation fee in the deal when he faced PAC.
Equity Bank said it received communication of the takeover on August 19, 2014 and payment done on September 1.
The committee had initially demanded Sh2.9 billion but the bankers explained that was subject to payments that would have been made while the deal was being sealed.
The bank also denied that it had written to the credit bureau over the delays in payment by City Hall.
Mr Mwakanongo had told the Accounts Committee that the threat of being blacklisted had prompted the takeover.
Equity Bank said it was ready to re-negotiate the deal and “was surprised when the client walked away.”
The new deal will cost Nairobi county Sh4.8 billion over a period of eight years after City Hall renegotiated interest rates on the loan.
Equity was charging a varying annual interest rate of between 18 per cent and 24 per cent basis on a reducing balance.
The county has committed to repay Sh50 million a month down from the Sh140 million interest it was paying to Equity Bank.
The bank official also denied that lease of premises at City Hall was part of the loan deal extended in 2011.
The money was supposed to help pay off statutory debts to allow the defunct city council access Local Authority Transfer Funds (LATF).
Equity Bank officials, however, failed to produce statements supporting direct remittances to National Social Securities Fund, Kenya Revenue Authority, Local Authorities Pension Trust and Local Authorities Provident Fund, which they blamed on a change in their banking system.
The statutory bodies apparently received Sh3.6 billion between April 1, 2011 and November the same year when Equity Bank migrated from Finacle version 7 to version 10.
Mr Njenga promised to provide instructions from City Hall to pay other creditors from the remainder of the loan.
The bank was relying on endorsements from City Hall signed by an external auditor to verify creditors who were due for payment.