Citi Bank embroiled in contract row with Kenyan firm

Corporate lender Citibank. [Courtesy]

American lender Citi Bank is headed for a battle with a Kenyan telecommunications firm over alleged breach of contract.

In a complaint raised with the Central Bank of Kenya (CBK), Adrian Kenya Ltd (AKL) says Citi Bank has frustrated it, making it lose business and battering its reputation.

The bone of contention between the two, according to the letter to CBK, originated from a 2018 deal that the lender entered into with the firm. 

Adrian Kenya says, at a meeting with Citi Bank representatives, the lender sold them a deal that would see them access up to a $10 million (Sh1.33 billion) credit facility. In return, the local firm would open transactional and operational accounts with the Nairobi-based branch.

“These accounts were designed to facilitate day-to-day banking transactions, including but not limited to deposits, withdrawals and funds transfer,” it says in a complaint it has lodged with the CBK against the lender. 

With the deal done, the relationship between the two soared and Citi Bank upped its credit line to Adrian Kenya to $14 million (Sh1.86 billion) in the period. 

The credit line, Adrian Kenya told the regulator, was safeguarded by various securities. “This included the creation of an all-assets debenture over its assets, multiple land charges, deeds of assignment and corporate guarantees,” the firm says in its complaint seen by The Standard.

The deal was also anchored on Adrian Kenya's earnings from contracts with various firms being channelled through Citi Bank. This was with an understanding that the American lender every month would deduct its dues and let Adrian Kenya utilise the remainder of the funds.

Citi, in a rejoinder however dismissed the allegations as "inaccurate" when reached for comment by The Standard. 

“We acknowledge receipt of Adrian Kenya Ltd’s letter that highlights various concerns they claim to have regarding their banking relationship with Citi Kenya. Upon careful review, we can confirm that the allegations therein are inaccurate and or based on the wrong interpretation of facts," Citi told The Standard in an email response.

"Citi remains committed to upholding the highest standards of banking practice and compliance with the law and regulations governing the same."

In 2021 however, Adrian Kenya Ltd says the lender, had begun to frustrate it, by allegedly refusing to honour some of its part of the deal.

For example, it says it won a contract with Athi Water Works Development valued at Sh63 million, but the lender allegedly refused to issue them with a letter of credit. “Citi Bank authorised the payment of the deposit of 20 per cent and declined to issue a letter of credit for the balance to date,” it adds in the letter dated May 3, 2024, to the regulator. 

Again in 2022, it says it won a contract with Kenya Electricity Generating Company (KenGen) worth Sh36 million but Citi Bank went ahead and made an advance payment and later issued a letter of credit. 

“Suddenly and without communication, Citi Bank withheld the letter of credit, an action which severely affected the KenGen project which in turn led to the client terminating the contract citing effluxion of time and non-performance on the part of AKL,” the document reads in part. 

In 2023, Adrian Kenya claims Citi Bank withheld funds in its accounts without justification. On diverse dates between May 4 and 30, 2023, AKL says its accounts were credited with Sh148 million by Safaricom. As per the deal, Citi Bank was only to deduct $138,000 from its accounts and leave open the balance for AKL use.

 “Citi Bank decided to hold the entire sum, without proper explanation or communication to AKL, an action that was in breach of the agreement…The bank's actions hampered the performance of contracts within Safaricom PLC and Atlas Towers,” said the firm.

As a result, Adrian Kenya told the regulator that this further affected its ability to pay debts to critical suppliers and stakeholders such as the Kenya Revenue Authority.

Faced with an operating environment characterised by high foreign exchange rates and a harsh economic time, Adrian Kenya says it also sought Citi Bank’s attention in a bid to review the deal. This it says was in recognition that the facility it had with them was not in arrears and as a sign of goodwill.

In January 2024, AKL wrote a letter to the bank seeking among others Sh150 million project financing line to support its business. It also asked for a Sh300 million working capital line for operational requirements. AKL also sought a Sh55 million overdraft to meet its recurrent expenses

This, the firm says all these fell on deaf ears as the lender has severally ignored its request for meetings and letters to discuss their relationship. But it would be a stray email to Adrian Kenya that tells CBK lifted the lid on what it documents as a systematic process to frustrate it. 

 In the briefing email to Citi Bank’s Nairobi bosses, an officer intimated that they intended to exit Adrian Kenya as a client. This is despite the officer acknowledging that the relationship was good and the firm was up to date on its repayments.

The email attached as evidence to the regulator notes in part. "The objective of this relationship remains to exit. However, Citi is determined to continue supporting the client to deliver on their framework and ensure continuous generation of cash flow for exposure paydown. This will ensure an orderly exit.”

Adrian Kenya now wants CBK to investigate Citi Bank’s conduct and hold them accountable for loss of business while also pleading with the regulator to order full financial restitution for all losses it has incurred.