Bank of Africa has been allowed to auction a prime property belonging to the CEO of fallen retail giant Nakumatt, triggering a fight with KCB Group #ticker:KCB that last November sold the asset for Sh1.04 billion.
High Court judge Alfred Mabeya directed Bank of Africa to auction the property in Industrial Area, Nairobi, to recover Sh460 million advanced to Nakumatt on condition that it notifies other lenders of the forced sale.
But earlier court disclosures showed that KCB pressed for a speedy auction last year and sold the property to Furniture Palace International Ltd for Sh1.04 billion, taking a loss of about Sh1 billion.
Justice Mabeya’s ruling sets the stage for a battle for the right over the property between KCB and Bank of Africa.
The asset had also been charged to DTB Bank #ticker:DTK and Standard Chartered #ticker:SCBK, raising questions how multiple lenders would offer loans in excess of Sh4 billion based on a single security valued at less than Sh2 billion.
Justice Mabeya said Bank of Africa was free to auction the property because both Nakumatt and Mr Shah’s firm, Collogne Investments, had admitted to defaulting on the Sh460 million loan.
“For avoidance of doubt, no new notice of sale ought to be issued since all the other parties, including Nakumatt and Collogne Investments, have acknowledged receipt of the same. All that the bank has to do is to serve the other charges (lenders) with the said notice,” Justice Mabeya ruled last Thursday.
The ruling followed an application by Nakumatt Holdings Limited (under administration) protesting that if the intended sale proceeded, it would suffer irreparable loss because other lenders would pursue it for the recovery of unpaid loans.
Interestingly, the same judge had on November 24 cleared KCB to auction the same property. This allowed the bank to press for a speedy auction, fearing an appeal would open the window for rival lenders to scuttle its claim on the asset.
KCB revealed to court in November that Furniture Palace International had emerged the best bidder for the property and that the sale was set to be completed on November 25.
The banks offered Nakumatt billions of shillings on the strength of the retail chain’s cash flow. But Mr Shah used his company, Collogne Investments, which owned the Sh2 billion property in Nairobi, as Nakumatt’s guarantor to offer additional comfort for the multiple bank loans.The banks have been battling to seize assets linked to Mr Shah and his […]