NCBA Group and Co-operative Bank have surrendered a firm they seized from billionaire Manu Chandaria’s Comcraft Group after they gave up pursuit of a Sh6.6 billion debt.
The banks last year appointed a receiver manager to turn around Kaluworks, one of Kenya’s largest manufacturers of aluminium utensils and roofing sheets, or protect its assets in the race to recover the multi-billion shilling debt.
But the lenders opted to return the firm to Chandaria’s Comcraft Group after balking at having to inject Sh750 million to revive the company amid hurdles in getting a buyer for the firm.
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The placement of Kaluworks under receiver manager Pongangipalli Rao marked a rare blot in the career of industrial magnate Mr Chandaria, the chairman of Comcraft.
Commercial banks are shunning forceful auction of property seized from loan defaulters in favour of private settlement after Kenya’s soft economy slashed asset prices below the minimum bid value set in law.
As a result, auctioneers are not selling as fast as they are repossessing due to the minimum bid price.
Kaluworks’ shareholders have agreed to pay the bankers Sh1.2 billion to lift the receivership, with NCBA and Co-op Bank opting to cut their losses.
A consent filed in court and seen by the Business Daily shows NCBA has agreed to an 88 percent write-off of its loan while Co-op Bank accepted to lose 55 percent of the Sh9.1 billion loans.
NCBA put the company under receivership over non-payment of a Sh4.3 billion debt, placing the C-oop Bank loan at Sh4.8 billion.
Under the settlement, Comcraft Group will inject Sh150 million to revive the business, offer NCBA Sh580 million and Sh628.4 million to Co-op bank.
“It was agreed that out of the capital injection of Sh1.2 billion an amount of Sh580 million will be paid to NCBA in full payment of NCBA debts whereas a balance of Sh680.4 million will be paid to Co-op bank,” PVR Rao said in the consent.
“The settlement entails write-off of 55 percent by Co-op and 88 percent by NCBA, which both banks have approved.”
Kaluworks has been struggling financially over the last few years on the back of weak sales and increased competition from other cookware manufacturers.
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The receivership came months after several lenders, including I&M Bank, scrambled for auctioneers and debt collectors to auction multimillion-dollar properties, including residential and commercial complexes, which had been used to guarantee loans for Kaluworks after the firm failed to honour its obligation.
A regional expansion drive and Sh1.8 billion investment to upgrade its factory in Mariakani, Mombasa, stretched its cash flows, deepening the defaults.
Mr Rao says this 2012 investment was expected to enhance sales of approximately 5,000 metric tonnes of premium colour roofing in the East Africa region.
However, the company could not compete with cheaper alternatives imported from China, even as loan interest costs mounted.
Court papers show the company was knee-deep in Sh12.6 billion debts, including bank loans, unsecured commercial paper holders and shareholder advances, against assets of Sh1.3 billion when placed under receivership in May 2021.
Mr Rao gave the creditors options, including injecting the Sh750 million to revive the business, lease the company or sell the assets.
“In the view of lenders’ indisposition to provide further funding the administrator was unable to run operations of the company,” Mr Rao said.
Shareholders then offered to bail out the company, injecting Sh1.2 billion to pay off the debts and secure control and ownership.
“The restructuring and compromise through voluntary arrangement is proposed following the inability of the company to settle its outstanding debt obligations as at the relevant date and to enable the company to run the operations of the company as a going concern by termination of administration,” says the report filed in court.
Kaluworks is a subsidiary of Clovis Company Limited, a Bermuda-registered investment holding company that is owned by the Comcraft Group, of which Mr Chandaria is the chairman and controlling shareholder.
Mr Chandaria, who is also a leading Kenyan philanthropist, has previously distanced himself from Kaluworks’ operations.
Bankers say Kaluworks’ links to Mr Chandaria gave them additional comfort to offer the pots and pans manufacturer the multi-billion shilling debt.
Information on its website shows that Kaluworks was set up in 1929.
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Mr Chandaria’s father, an Indian immigrant, laid the earliest foundation of the Comcraft Group in 1915 when he relocated to Nairobi to start a provisions shop in Nairobi’s Biashara street.
As the business grew, his father and extended family members subsequently acquired Kaluworks.
When Mr Chandaria returned to Kenya after studying in the United States, he joined the company, expanded the group’s product offering and steered it to its remarkable growth.
Comcraft is now spread in more than 40 countries and US business magazine Forbes in 2011 estimated Comcraft to be worth $2.5 billion (Sh215.6 billion), the last time it valued the business.
In 2011, Mr Chandaria made it to the Forbes 40 Richest Africans list, and he is one of Kenya’s wealthiest businessmen.
In 2012, Kaluworks raised $14 million (Sh1.5 billion) in a corporate bond sale.
Sanlam Kenya listed Kaluworks as one of the defaulters of a commercial paper it invested in.
Sanlam had to write off Sh1.15 billion mainly related to investments in firms that fell into financial distress.