City Hall has revealed plans to restructure a Sh4.45 billion KCB Group #ticker:KCB loan in a bid to end a legal showdown with the lender and avoid property auction.
The county said that it will approach the lender and re-negotiate the terms of the loan to pay Sh55 million monthly over eight years.
City Hall did not disclose if it will seek a review of the interest rate from the 13 percent that KCB Group charged after it inherited the loan from Equity Bank #ticker:EQTY.
The two are locked in a legal dispute after KCB Group sought court orders last year to enforce collection of the debt raising fears of property auction to recover the money.
KCB Group inherited the loan from Equity Bank in September 2014 and offered City Hall a grace period of six months before it could start servicing the debt over eight years.
Equity lent the now defunct Nairobi City Council Sh5 billion in 2011 to pay statutory deductions but the loan was transferred to KCB Group.
“The county is in process of negotiating to restructure repayment of KCB loan by installments of Sh55 million per month for eight years,” City Hall says in its Debt Management Strategy for the 2021/22 year.
The push to re-negotiate the loan repayment terms comes barely three months after KCB Group went to the High Court seeking to enforce collection of the then Sh4.3 billion in principal and interest.
KCB Group wanted the court to recognise a ruling from an arbitration dispute and compel the county government to settle the debt or risk property auction.
The lender moved to the arbitrator in November 2019 after a dispute arose before City Hall could start serving the loan.
The arbitrator had ruled the county owed KCB Group a total of Sh4.29 billion. He further directed the county to pay the lender Sh6 million as additional costs incurred while trying to pursue the debt and another Sh3 million for tribunal costs.
City Hall has, however, continued to default on the loan even after an arbitrator confirmed KCB’s claims and directed the Nairobi government to settle the debt.