The Bank of Uganda top officials on Friday failed to explain to parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) how they came to sell loans of three defunct banks at 93 percent discount to Nile River Acquisition Company (NRAC) registered in Mauritius, a tax haven.
Cosase is now in the third week of probing BoU officials on the controversial closure and liquidation of seven commercial banks including Teefe Trust Bank, International Credit Bank (ICB), Greenland Bank, Cooperative Bank, Global Trust Bank, National Bank of Commerce and Crane Bank Limited which was sold in January 2017.
Mr. David Opio Okello who once served at BoU as Executive Director Supervision and Acting deputy governor could not explain the role of M/S J.N. Kirkland & Associates which was contracted to identify a buyer of loans of Greenland Bank, Cooperative Bank and ICB.
M/S J.N. Kirkland & Associates would later identify Octavian Advisors, LP which expressed interest to purchase the assets of the three banks at US $.10.0 million from BOU but Following further negotiations with BoU, N4/s Octavian Advisors, LP registered Nile NRAC in order to transact with BoU and finally bought the assets at US $5.2 million (Shs8.89 billion). The assets which included secured loans worth Shs35 billion, unsecured loans, poorly secured loans and unknown loans were sold in a lump sum, thus devaluing secured loans.
The debt portfolio comprised of Secured, Poorly secured, unsecured and unknown loans amounting to Shs135, 054, 430, 888,” Auditor General John Muwanga says in his special audit report of BoU on defunct banks. According to the report, the sale of the loans to NRAC resulted in a variance of about Shs126.2 billion.
Mr. Opio could not explain the rationale for selling assets of the three banks at 93 percent discount. MPs as such directed BoU officials to produce minutes of the meeting that led that decision, list of buyers of the assets from NRAC, the evaluation reports from BoU.
Asked why BoU had to sell loans of the three banks at US $5.2 million and not at US $10 million as early agreed with Octavian Advisors, LP, the holding company of NRAC, Opio could only say that BoU had collected Shs2 billion of the US$10 million before NRAC bought off the loans at a paltry Shs8.89 billion.
He also surprised the MPs when he said that Octovian Advisors LP did a due diligence of the loans and decided to buy at US$5.2 million, which price BoU accepted without even going to the ground to evaluate the assets attached to loans. BoU explained that they did desktop evaluation.
Ms Justine Bagyenda, the former executive director of supervision at BoU, who has dodged the MPs, is also wanted to explain on the same issue because she appended her signature on one of the documents.
Brig Francis Tukahiirwa said BoU was in a hurry to sell the loans and asked whether there were no other buyers at the time NRAC bought the assets.
The MPs have now tasked BoU to produce a list of the buyers of the assets as well as the list of the assets handed over to NRAC and the list of the details of the assets for easy crosschecking. The MPs contend that the sale was not done according to the related laws.
The Legal Counsel at BoU Margaret Kasule also shocked MPs when she said they are unable to find some of the documents related to the sale of the loans since they are in possession of NRAC. The MPs could not buy her argument and asked the officials to bring the documents with them when they appear to parliament again next week.
BoU management also explained that estimating the recoverable amount of a closed bank’s loan portfolio cannot be done with precision. “Because of uncertainty in the recoverable value and the costs related to recovery, it is always true that any buyer will be unwilling to pay the full book value of a portfolio of bad debts. It is inevitable that these portfolios will always be sold at a discount,” they responded. But this response did not catch the attention of the MPs.