KCB takes over Mombasa tycoon’s company in Sh1bn bad debt tussle

Kenya’s biggest bank by capitalisation, KCB, has taken over a milling company owned by Mombasa tycoon Tahir Sheikh Said citing its default on a Sh1 billion loan.

KCB, which has in excess of Sh1 billion non-performing loans with Tahir Sheikh Said (TSS) Unga Millers, issued a notice in May indicating that it had taken over management of the miller.

“Notice is hereby given that the above company was placed under administration by Kenya Commercial Bank Limited on May 30, 2016,” the bank said in a recent statement.

“None of the directors, shareholders, employees and no other person is authorised to transact any business on behalf of the company without express written consent from the Administrator.”

The Business Daily has confirmed that the businessman, commonly known as TSS, has defaulted loans in excess of Sh2.7 billion associated with TSS Unga Millers.

The businessman is said to have Sh8 billion in total non-performing loans with a number of banks booked under other subsidiaries in his business empire.

KCB declined to comment on this matter citing customer confidentiality but sources within the bank told the Business Daily that the bank was in the process of disposing of a prime piece of land in Mombasa that the billionaire had charged as security for the loan.

Wealth in Kenya report of 2014 listed Mr Tahir as one of the largest land owners in the country.

His fortunes, however, seem to have taken a turn after the government cancelled title deeds to large tracts of land in Lamu that were associated with him.

Some of the land is said to have been used to secure loans in excess of Sh5 billion from two public listed banks.

The businessman is known to have defaulted on at least Sh1.4 billion with NIC Bank and Sh300 million with National Bank.
KCB-appointed administrator, P.V.R Rao, has called all creditors of the company to register with him in an effort to gauge TSS’s financial status.

By close of last week, the tycoon was yet to provide the administrator with his financial statement, prompting the call to creditors ahead of a meeting that was to be held in Mombasa Tuesday.

“As the directors of the company have not availed statement of the company affairs to the administrator, it is important that the creditors, who wish to attend the meeting shall come with proof of debt along with copies of all documents to support their claim,” the administrator said in a statement released one week ago.

Jump in non-performing loans

KCB recorded a Sh7 billion jump in non-performing loans to Sh26.1 billion in March from 19.2 billion in December, underlining the impact of TSS’s default on its books while National Bank’s bad book shot up by Sh5.2 billion over the three months to Sh16.9 billion.

NIC Bank is said to have advanced the loans to TSS late last year, and had acquired part of the loans from another listed lender. The bank’s bad book more than doubled in the six months to March to Sh12.8 billion from Sh6.1 billion in September.

TSS has been entangled in several court cases, most of them involving land ownership.
Mr Tahir also has multi-billion shilling investments in transport and petroleum.

TSS Transporters, a passenger bus service that plies the Nairobi Mombasa route, and TSS service stations also fall under the businessman’s empire.

The National Transport and Safety Authority (NTSA) in March suspended TSS Transporters’ night operating licence over the involvement of its buses in road accidents.

The volume of bad loans in Kenya’s banking sector shot to a decade-high of Sh170 billion in the past one year following stringent enforcement of regulations by the Central Bank of Kenya under governor Patrick Njoroge, who took charge mid last year.
Large customers, such as TSS, have been cited as the main source of the bad loans pile up.

TSS whose total non-performing loans are estimated to be over Sh8 billion is carrying five per cent of the industry’s bad book.
Banks usually treat corporate customers with kid gloves — often bending over backwards to accommodate their needs.

Most lenders are willing to disburse quick loans to the wealthy on friendlier terms in an effort to entice them to bring more business — a strategy that has, however, left many exposed.

A survey by the not-for-profit financial research firm, FSD Kenya showed that rich Kenyans are likely to refinance a loan through borrowing while the poor have to sell their assets to repay.

Equity Bank chief executive James Mwangi in an investor briefing earlier in the year said the bank was forced to write off a Sh2 billion loan last year after carrying it for some years in its books.

Bank of Africa’s non-performing loan book quadrupled last year to Sh9.7 billion — a development it attributed to 15 large customers that accounted for more than half of the bad debts.

FSD found that 32.6 per cent of the rich surveyed had taken another loan over the last year to repay an existing one compared to 22.9 per cent who had sold an asset to pay debt, underlining the banks’ willingness to fund the rich.

Meanwhile 28 per cent of the poor had sold their assets, with 19.5 per cent getting refinancing to settle debt obligations.

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