Murky Deal: Billionaire Peter Muthoka Secured Sh510M Loan From Bank Using KAA Land

Details have emerged on how a murky deal masterminded by a Nairobi businessman could make the Kenya Airports Authority (KAA) lose prime land.

Mr Peter Muthoka, the man at the centre of the CMC Motors saga, secured Sh510 million in April 2010 from Standard Chartered Bank using the land as security without disclosing the terms of the financing facility to KAA.

At the time, KAA had no information on the loan period or repayment terms. As a result, the State corporation risks losing the land within the cargo terminal area at the Jomo Kenyatta International Airport.

Land lease


Through his company, Transglobal Cargo Centre, Muthoka secured the loan on the basis of a 60-year lease granted on the land KAA owns.

Documents in our possession reveal Transglobal now wishes to borrow an additional Sh350 million using the same land as security, and is seeking consent from KAA.

The deal has effectively exposed KAA to the possibility of losing the land in case Transglobal cannot repay the loan.
 Alternatively, KAA would have to take over the loan to save the land because it was kept in the dark on the nature of risk assumed by Transglobal was concerned.

“The charge documents do not disclose the terms of the financing of the facility and therefore the Authority has no information on the loan period, repayment terms, conditions for drawdown,” states a letter by KAA lawyers addressed to Joy Nyaga, KAA acting company secretary.

Moreover, the letter seems to question how KAA agreed to the long-term lease on the land with limited options to terminate it.
According to the lease agreement that commenced on October 1, 2008, Transglobal was granted the land for an initial period of 20 years and automatic extension for another 20 years “without the requirement for the tenant (Transglobal) to express any intention to have the initial term extended.”

Lack of response


The agreement further states KAA shall grant Transglobal a further 20 years meaning the lease can extend to 60 years at the option of Transglobal.

Calls to Peter Muthoka’s cellphone went unanswered.
 Besides, KAA agreed into the long-term concession without taking into account that Transglobal could fall into financial difficulties and be liquidated or restructured.

“The authority has no right to veto the transfer of shares in Transglobal to third parties. For 60 years, the power of decision making over the part of the Authority’s land has been handed over to persons who are not under the Authority’s control,” states the letter.

Transglobal Cargo, which is licensed by KAA to provide cargo handling services at JKIA, procured the loan in 2010 ostensibly to construct a cargo handling facility at the airport on a build, operate, transfer (BOT) arrangement.
Although naturally at the expiry of the lease KAA would inherit the new building, this is not a guarantee.

“The Authority does not appear to have rights to acquire the fixtures, plant and equipment, which form the core of the cargo handling business,” states the letter by Albert Mumma and Company Advocates, commissioned by KAA to investigate the transaction.

STORY UPDATED

A parliamentary committee  has resolved to summon the Treasury secretary, the National Land Commission and a commercial bank to explain how an airport land title was used by a private firm to secure a loan of Sh510 million.

The Public Investment Committee (PIC) said Standard Chartered Bank will be required to appear before it to provide the legal authority it used to extend the loan to Transglobal Cargo Centre Limited.

Kenya Airports Authority managing director Jonny Anderson.

PIC grilled the Kenya Airports Authority (KAA) managing director Jonny Anderson over the lease agreement that it entered with Transglobal Cargo for use of Jomo Kenyatta International Airport land.

This is after Auditor-General Edward Ouko said in an audit of KAA that the logistics company, associated with billionaire businessman Peter Muthoka, secured the charge on airport land for a Sh510 million loan from the Standard Chartered Bank.

“We will summon the CS Treasury, NLC and Standard Chartered bank to know how Transglobal secured an I.R number which it used to secure the loan without the authority of the Treasury. We also want to know how the original lease of 20 years was extended to 40 years and latter 60 years,” PIC chairman Abdulswamad Nassir said.

He said the committee wants to establish from NLC whether the I.R number had been used to acquire a title deed for the leased airport land.

PIC put Mr Anderson to task to name the persons who authorised the use of the lease to secure the bank loan and those behind the extension of the lease period from the original 20 years.

“I am not in a position to respond if the extension of the lease was approved by the board or not. But we can provide the name of the managing director and members of the tender committee who approved the 20 year lease to Transglobal,” Katherine Kisila, the KAA company secretary told MPs.

Transglobal Cargo Centre signed the 20-year lease agreement with Transglobal to operate freight services at the Jomo Kenyatta International Airport.