KCB set to auction City Hall over Sh. 4.3 billion debt

KCB Bank has being the green light by the High Court to seize and auction assets belonging to the Nairobi County over a Sh. 4.3 billion debt. This amount includes Sh. 4.29 billion of the award and costs of Sh. 6 million.

This is after High Court judge Justice Chacha Mwita dismissed Nairobi County’s application that was seeking to challenge the amount awarded by an arbitrator in November 2019.

“In the circumstance, therefore, having considered the application, the response and submissions as well as the law and the decisions relied on by parties, and upon giving due consideration to all those, the conclusion, I come to is that the application dated 2nd October 2020 has merit,” Justice Mwita ruled.

According to the court ruling, Nairobi County government has continued to default on the loan even after the arbitrator, Phillip Bliss Aliker, confirmed the loan and directed that the debt be settled.

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The money was initially owed to Equity Bank. However, KCB bought the loan in September 2014, by offering better terms to the County government. Also, court documents showed that the loan was taken way before the introduction of the county government systems in 2011 when Equity lent the defunct Nairobi City Council Sh. 5 billion. This money was supposed to help pay off statutory debts to allow the city council to access Local Authority Transfer Funds.

“Equity said in 2014 that City Hall owed it Sh. 4.75 billion, including an overdraft of Sh.1.45 billion. When KCB took over the loan in September 2014, it gave the county more time to repay the debt by increasing the maturity period to eight years at an interest rate of 13 percent. Equity was charging a varying annual interest rate of between 18 percent and 24 percent on a reducing balance and the county was required to pay back the money in 60 months,” a report that appeared in the Business Daily on the court ruling said.