Credit Suisse Disputes Fees Shown in Kroll Mozambique AuditBy
Debt investigation shows $500 million in unexplained loans
IMF says probe necessary to start negotiating new aid program
Credit Suisse Group AG, which helped arrange the majority of the $2 billion in Mozambique state-backed loans that plunged the country’s economy into crisis, disputed that it received more than $160 million in fees for arranging the financing.
The bank was responding to Kroll LLC’s audit report into the loans that said it and Russia’s VTB Bank PJSC were paid almost $200 million in arrangement and contractor fees. The investigation showed that Mozambican state companies failed to account for about a quarter of the proceeds of $2 billion in loans being investigated, according to the Kroll report.
“The reporting that Credit Suisse realized $100 million or more in ‘arranging’ fees is incorrect and misleading,” a spokesman for the lender said in an emailed statement Sunday. “Banking fees for Credit Suisse totaled $23 million –- roughly 2.3 percent of the total financings and is in line with comparable emerging-market financing transactions.”
The summary of the audit into three government loans could help pave the way for restructuring talks with owners of the debt and mend relations with the International Monetary Fund. The fund halted payments to the world’s ninth-poorest nation in April last year, when the government revealed it guaranteed two previously hidden loans by state-owned companies totaling more than $1 billion.
According to Kroll’s report, Credit Suisse received a combined $23.8 million in banking fees for loans to state-owned companies ProIndicus and Ematum. On top of that, the Swiss bank deducted almost $141 million in so-called contractor fees from the loans. They “were introduced to allow the lending banks to achieve a return at an interest rate more accurately reflecting Mozambique’s risk profile,” Kroll said. The contractor fees were effectively passed on to other lenders, the investigator said, citing Credit Suisse.
VTB was paid $35 million in banking fees for a loan to Mozambique Asset Management and didn’t deduct a contractor fee.
The IMF, which has said the probe was necessary for it to resume funding to the country, noted “information gaps” on how the money was used but otherwise welcomed the release of the audit. “These documents constitute an important step toward greater transparency regarding the loans,” it said in a statement Saturday.
The Finance Ministry announced in October it can’t afford to service its commercial dollar debt, and defaulted on its $727 million Eurobond at the start of the year. It’s also missed payments on two state-guaranteed loans. Arrears for all three loans total about $490 million.
Mozambique’s $727 million Eurobonds that the Ematum loan was converted into last year were little changed at 75.11 cents on the dollar by 10:33 in London.
Palomar Capital Advisors Ltd., another financial advisory company that helped arrange some of the debt, called the report “flawed and incomplete.” Kroll didn’t request any information from Palomar regarding the audit, the Swiss company said in an emailed statement Sunday.
“Notwithstanding Palomar’s offer to meet with Kroll, at no time prior to the finalization of the report did Kroll request any information or seek assistance from Palomar,” it said. “As a result, the report is flawed and incomplete, and contains a number of materially inaccurate and misleading statements.”
Kroll said the Swiss company had received $3.8 million for advising the government on the restructuring of a $850 million loan taken out by Ematum, a tuna fishing company. It also said Palomar was paid $7.8 million in “running fees” for helping to restructure a loan to ProIndicus.
Palomar said wasn’t involved in arranging the ProIndicus and Ematum loans in 2013, and was an unpaid co-arranger of a loan to MAM.
VTB won’t comment on the Kroll audit until the Moscow-based lender has completed a detailed review of the report, according to a statement from the press office.