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Factory assets of edible oil firm put on sale over Sh2bn bank debt
The auction of an edible oil processing factory owned by Convex Commercial Logistics Limited comes two months after the High Court allowed the Stanbic Bank to sell the property to recover the debt.
An edible oil processing factory owned by Convex Commercial Logistics Limited has been put for sale in a bid to recover a Sh2 billion debt to Stanbic Bank, a few years after the owner ran into financial problems due to the Covid-19 outbreak.
The bank, through its appointed auctioneer Garam Investments, has invited buyers of the assets of the factory located within the Export Processing Zone (EPZ) in Athi River, Machakos County.
The auctioneer said that the "brand new" edible oil processing plant sits on two parcels of land totalling 25 acres. The forced sale, scheduled for September 9, 2025, intends to dispose of both the land, the factory machinery and the go-downs.
The auction comes two months after the High Court allowed the Stanbic Bank to sell the property to recover the debt.
Justice Alfred Mabeya dismissed the company’s request to halt the intended sale, ruling that it did not specifically prove the alleged delayed bank disbursements, the amounts, and the periods applicable.
Through its representative, James Waithaka, the company and its affiliate, Convex Commodity Merchants Limited, had asked the court to stop the auction because they had secured Sh500 million alternative financing from the Kenya Development Corporation to complete and commission the refinery.
They disclosed that they were negotiating a facility for $18.4 million (Sh2.37 billion) with Ethos Asset Management Inc., an American project finance lender, for purposes of taking over the facilities.
The court heard that the bank had been provided with all this information, yet it persisted in its intention to auction off the refinery.
The companies wanted the court to prevent the bank and its agents from interfering with or dealing in any way with their property, which was described as an edible oil processing plant together with the machinery erected on two land parcels, or any other assets registered in favour of the companies.
However, Justice Mabeya said that there was no concrete evidence that the companies had applied for alternative funding, and that there was a process in place for releasing the alleged financing from these sources.
After finding that the balance of convenience favoured letting the bank recoup its money, since it was clear the borrower was in default, the judge approved the bank's intention to sell the property.
The companies attributed the loan default to adverse economic conditions and the bank's failure to disburse the loan on time.
"There is no doubt that once a property has been charged to secure financial accommodation, it becomes a commodity for sale once there is default, and there is no commodity for sale whose loss cannot be compensated by an award in damages. A chargor who offers his property as security clearly anticipates the sale of the property in the event that he fails to service the loan," said the judge.
The company borrowed Sh1.5 billion from the bank in December 2020 to set up an edible oils refinery plant. It engaged the bank to provide financing for the completion of the plant.
They offered two properties, including the site of the edible oil factory, as security for the loan.
The company claimed that there were occasional delays in the disbursement of the loan facility by the bank, which forced them to divert funds from their trading and logistics business to the construction of the oil refinery. This affected the flow of their finances.
Construction was further hindered by numerous challenges brought about by the outbreak of the Coronavirus (Covid-19); thus, the construction projections required revision.
The court dispute began when the bank hired an auctioneer in June 2023 who threatened to sell the edible oil factory at auction.
