CfC says India bank aware of Karuturi’s receivership

CfC Stanbic Bank has communicated to its Indian counterpart ICICI Bank on the decision to place Naivasha flower firm Karuturi Limited under receivership, documents filed at the High Court have revealed.

CfC and ICICI are joint holders of collateral pledged by Karuturi for loans totaling Sh3.8 billion.

Karuturi has applied for the court to lift the receivership, arguing that the assets it had pledged as security for CfC’s Sh383 million loan are also used as collateral for another Sh3.4 billion loan owed to ICICI Bank.

“The defendant has informed ICICI Bank of the appointment of receivers and the validity of the appointment has not been challenged by ICICI Bank,” said Alfornse Kisilu, CfC Stanbic regional head for business support and recoveries, in an affidavit.

CfC placed Karuturi under receivership last month after the flower firm defaulted on repayment of its loan. The bank has disclosed in court papers that it intends to sell off Karuturi once valuation of its assets is completed.

READ: High Court allows CfC Stanbic take-over of Karuturi

Karuturi, through its sister companies Surya Holdings Limited and RHEA Holdings Limited, had argued CfC cannot sell off the land since the assets are shared security between the two lenders.

Surya Holdings and RHEA have disclosed in court documents that they own all land on which Karuturi does its farming.

CfC, however, says Karuturi cannot interfere with the two banks’ right to dispose off the collateral.

“The plaintiffs (Karuturi) are not party to that security sharing agreement. They have no rights or duties under it,” said Mr Kisilu.

CfC also denies Karuturi’s allegations that it breached contractual obligations under the loan agreement.

READ: Karuturi reveals CfC security also held by India bank

The bank said it withdrew the credit line after the flower farm defaulted on repayment of the loan.

The flower farm borrowed Sh222.7 million from CfC Bank in December 2012, to be repaid in equal 60 monthly installments of Sh4.5 million.

The bank says Karuturi only honoured the first installment of January 2013, and defaulted on the subsequent months prompting it to issue a statutory notice.

But Karuturi says CfC, without notice, stopped disbursing agreed banking facilities last year making it difficult for the flower firm to pay its debts. This it says was meant to push it to financial difficulties so CfC could take over its assets.

The flower firm says the financial difficulties occasioned by stoppage of the loan facility led to one of the suppliers, Allpack Industries Limited, filing a winding up case that is still pending in court.

The court in October issued an order barring Allpack from auctioning the flower firm’s assets.

Karuturi says the assets used as security with CfC Bank are valued at Sh7.8 billion ($90,951,630), and it is unrealistic for the bank to put the massive assets on sale to recover the debt it estimates to be five per cent of the total value of the assets.

The bank denied the allegations by Karuturi that it is acting in the interest of powerful politicians and well-connected businessmen who want to take over the property, but clarified the valuation of the property is going on to allow sale of the company.

Karuturi is pleading with the court to lift the receivership and forestall the planned sale, arguing that it will be difficult for it to secure an equivalent prime land in Kenya if its current land is sold off.

The flower firm says it is negotiating with Allpack industries, which initiated winding up petition, in order to settle the suit out of court.