KCB and Absa Bank are embroiled in a bitter fight over the control of the loss-making Savannah Cement, which went into administration after defaulting on loans of more than Sh14 billion.
In a case pending before the High Court, Absa now wants the two receiver managers appointed by KCB removed from office and blocked from interfering with the smooth running of the administration to its logical conclusion.
Absa appointed Peter Kahi as the administrator whereas KCB picked PVR Rao and PS Rao as the receiver managers.
In the twist, Absa has sought temporary orders to block the KCB appointed receiver managers from interfering with Mr Kahi’s control and running of the assets of the company.
“That this honourable court be pleased to remove Mr Ponangipalli Venkata Ramana Rao and Mr Ponangipalli Swaroop Rao from office as the receivers and managers of Savannah Cement Ltd,” Absa said.
Absa further wants the Athi River police commander to provide security and enforce the court order.
Savannah’s statement of affairs shows that KCB is owed Sh8.89 billion while Absa has a Sh5.23 billion exposure in the cement manufacturing firm. Absa’s loan is in both local currency and dollars, with the dollar portion being $16.45 million (Sh2.16 billion).
Lawyer Peter Wawire said in the application that when the matter was in court on June 6, the parties allegedly agreed to explore an out-of-court settlement by withdrawing the application to allow the administration process to continue.
However, KCB allegedly filed an objection which Absa says intends to undermine and frustrate the ongoing administration as it seeks to bar the administrator from implementing a statement of proposal passed on April 17, 2017 at the first creditors meeting of the company.
Mr Wawire claimed KCB has instructed its appointed receiver managers to frustrate the administrator from carrying out his duties.
He claimed that the administrator had been denied access to the area by the receiver managers and when he was finally allowed entry, he allegedly found considerable and extensive damage on the assets of the company following months of neglect.
The lawyer pointed out that there has been constant violence meted on the staff and contractors engaged by the administrator by the security personnel deployed by the receiver managers.
He said the receiver and manager have treated the administrator’s staff with openly condescending and contemptuous attitudes which culminated in the assault of some staff engaged by the administrator.
According to Absa, the receiver and manager were appointed illegally as it was contrary to section 560 (1)(a) of the Insolvency Act as it was in enforcement of securities held by KCB while the cement firm was already under administration.
Absa maintained that Mr Kahi has lawfully carried out his duties with the permission of the court and the statement of proposals sets out the manner in which the company’s affairs were managed, including details of the steps taken since his appointment and recommended the course of action for consideration.
The court documents said the administrator held the first creditor’s meeting on April 17, 2024 to deliberate on the statement of proposals. However, KCB receiver managers allegedly filed an application opposing the implementation of the report in May this year.
Mr Kahi had said in his report that the cement firm had been making losses for five straight years including 2022 when it collapsed and may not be able to be revived.
He disclosed that Savannah was as at May 2023 owing various categories of creditors to the tune of about Sh18 billion, meaning that the two banks account for 78.4 percent of the outstanding amounts.
The administrator says a turnaround of the business would be “very costly,” requiring over 10 years and without guarantee that the process will not leave creditors worse off.
“A turnaround of Savannah, would take an inordinately long period, likely over a decade, to materialise to the irreparable detriment of all creditors. The time risk is further enhanced by the limited term an administration can lapse,” said Mr Kahi in the report.
