In an unprecedented show of unity, the entire top flier banking sector in Uganda has united to oppose the decision of the high court – commercial division, that declared as illegal a syndicated loan to businessman Ham Kiggundu by DTB Kenya through DTB Uganda.
In a statement issued Thursday Oct. 8, the bankers association that brings together all 35 tier one commercial banks in Uganda, resolved to challenge the ruling up to the highest court.
The association says the ruling has enormous implications on Uganda’s economy and puts at risk trillions lent to government, international companies doing massive infrastructure projects by foreign lenders, through a syndicated system that the court ruled illegal.
In the case, DTB Kenya lent Ham Kiggundu US$10m through DTB Uganda. The banks argued that Kiggundu defaulted against the loan and therefore proceeded to seize collateral.
Justice Henry Odonyo on October 7, ruled that it was illegal for DTB Uganda to seize assets against loan facilities that were advanced by DTB Kenya because the later has no license to operate in Uganda.
The bankers made a number of unequivocal demands to government in the following statement in which they noted that the decision will unravel the sector.
B) As a result of the judgement and it’s implications, the syndicated portfolio that is now seated with commercial banks that is now at risk is over UGX5.7 trillion (US$1.5 billion) of running facilities across various sectors including real estate, road construction, energy covering hydro electric power, oil and gas and manufacturing among others.
The above figure does not include oil pipeline transactions that we’re still being processed or undrawn yet that have all been halted since the judgement came out.
The above figure excludes syndicated lending to government who is the biggest beneficiary not syndicated lending for various development programs in the country.
B) The wide sweeping nature and sheer weight of shock waves the ruling has sent to our international agency partners and lenders and the implications it has to the country as an investment destination.
C) The message the judgement is sending to other borrowers with foul intention who can now anchor their default on this judgement that declared syndication illegal.
D) The overall impact of the ruling on the economy.
The Bankers agreed in unison that:
– The will join DTB Ltd as an interested party in this appeal at a higher court.
To join DTB in filling for a stay of execution of executive orders of the hon. Justice as ruled.
– Banks have called upon bank of Uganda to pronounce itself on the matter.
– They’ve also asked government to pronounce itself through Ministry of finance to pronounce themselves on the matter especially since they are the accounting officers for the syndicated facilities contracted by government.
The banks argued that: “Government needs to reassure the financial sector, the international lending partners and the entire country of the commitment to continue honouring all debt obligations in line with agreed protocols.
