Kenya’s Capital Markets Authority and a top tier financial institution will be closely following a forensic audit by Deloitte, after it emerged that the lender’s books, which are now in question, were used to secure a bond and a short-term financing facility.

CMA has written to the pan-African lender seeking the terms of reference of the audit. It also wants an update on the settlement of a bond that had fallen due.

Shelter Afrique has two medium-term bonds that were issued at the end of September 2013 valued at $42.9 million and $7.6 million respectively. They are due in 2018.

“...The authority requests an update on the progress of these forensic investigations. As indicated, there were obligations on that bond that were to fall due and settled appropriately. Kindly confirm that this was done,” reads a letter from CMA director of market operations Wycliffe Shamiah.

Documents seen by The EastAfrican show that Shelter Afrique borrowed $10 million from Equity Bank in August this year for a one-year tenor pegged at 15 per cent.

The terms of the facility involved Shelter Afrique sharing with Equity its quarterly management accounts and its six-months audited financial results, which are now in doubt after its ex-finance director Godfrey Waweru blew the whistle on the lender’s alleged accounting techniques.

“We know that parts of these funds were used to settle the obligations of the bond that fell due while others were used to provide for impairments for some of the non-performing loans,” a source familiar to the matter said.

During its $35 million bond issue three years ago international rating agency Moody’s raised a red flag on Shelter Afrique’s loan portfolio. Today, some of the projects that the bond financed have been placed under the non-performing category.

Documents show that some of the projects listed under the non-performing loans run into more than $13 million. Most of them are in Kenya.

New documents have also laid bare the conflict of interest of one of the directors who used his company to do business with the lender.

Speaking to The EastAfrican, Mr Waweru said that even after the illegal approval of the $5 million placement with Amana Capital, which was to be done through Chase Bank, he was made aware that the funds were not placed with the lender as had been agreed between Shelter Afrique and the placement firm.

“Once we received the authorisation email from the managing director, we wired the funds to Amana accounts. A few days later, I called Chase Bank to confirm if the money had been received but they replied in the negative. I then instructed the new treasurer to push Amana to wire back the money to us after their three month placement, which was done,” said Mr Waweru.

A letter seen by The EastAfrican from Beatrice Mburu, the acting head of finance and treasury supports this. She asks Amana Capital to provide confirmation of the $5 million deposit and supporting documentation of the institution the funds were placed in.

Documents provided by Amana, which were shared with the Deloitte auditors early this month show that the funds were available at Chase Bank and eventually Standard Chartered Bank through its securities arm on a safekeeping basis.