Two local banks may now take over a state-owned oil company over its failure to pay a Ksh5 billion debt.
The money, which was lent eight years ago, was a short-term loan that gained interest to a high of Ksh5.3 billion as of August 2020.
The banks approached the National Treasury seeking approval to appoint an interim manager at the National Oil Corporation of Kenya (NOCK).
Although a committee had been put in place to help the bank recover its money while keeping NOCK from going bankrupt, this move could see the firm’s assets being sold to repay the debt.
By February 2021, NOCK collectively owed the two banks Ksh5.5 billion.
NOCK had borrowed from the banks through short-term credit facilities in order to purchase petroleum products.
The banks had earlier approached the Treasury in 2020 seeking to have the debt paid, after which the Treasury formed a committee that was expected to come up with a repayment plan for the loans without wiping out NOCK.
“A working committee was formed in 2020, made up of officials from the Treasury, the Petroleum ministry, NOCK and the State Corporations Advisory Committee.
The proposals included having the banks restructure the loans owed by NOCK. The loans that NOCK had taken were mostly overdraft facilities aimed at enabling them to buy petroleum product stocks.
These tend to attract high-interest rates,” reported a source wanting to stay anonymous.
In an effort to reduce monthly repayments, the committee came up with proposals to convert the debt into long-term loans and give Nock a 24-month moratorium.
