UBA Bank has been allowed to auction Uchumi Supermarkets' land on Langata Road over Sh162 million debt.
A High Court judge gave the lender the nod to sell the land, after noting that the collapsed retailer and the supervisor was yet to settle money owed to any of the secured creditors, three years after striking a deal on a Company Voluntary Agreement (CVA).
Last year, the lender dropped plans to auction the property after it emerged that the government was planning to compulsorily acquire the land and UBA would first be paid, after the sale, as it holds the title to the property as security.
This, however, did not happen and the lender revived the application to auction the land to recover its money.
Justice Mabeya said three years into the CVA, not a penny had been paid to any of the creditors and there was nothing to show that non-core assets would be sold and the proceeds be applied towards paying the creditors, as agreed. The judge added that there was also no mention of any collection of a penny or otherwise.
“Only beautiful promises that are made by the company (board). The company needs to be told that creditors do not live on empty beautiful promises that turn to be nothing but a bluff! Businesses and the economy are run on cogent and pragmatic proposals that are not only realisable but are practicable and real,” the judge said.
The company had opposed the application arguing that the matter had been dealt with in an earlier decision and the application dismissed.
In an affidavit, Mr Lawrence Ngao said the CVA was still intact and part of it had been revised after a creditors meeting.
He said the lender was seeking Sh161.5 million, which was only 10 percent of the land.
It was further contended that the lender had not obtained the consent of other lenders, such as the government that is seeking Sh1.2 billion and ICDC Ltd (Sh116 million.
Mr Ngao added that the entire body of creditors had approved the revival of the CVA on August 31, this year.
He further informed the court that the property is a key income generator and the success of the CVA depends on it and the agreement proposes to repay the lender’s loan in two years’ time rather than recall the amount immediately.
The lender denied knowledge of the alleged meeting as it was not invited to attend and that the bank does not recognise the revised CVA.
The court heard that the open market value of the property as at September 2018 was Sh600 million and forced sale value was Sh450 million.
In the CVA adopted on July 1, 2020, the creditors agreed that the secured creditors would receive a portion of their old debt as an upfront payment subject to the completion of the disposal of non-core assets, with the balance being paid over a period of six years and in other instances over a period of 5 years.
The CVA further stated that all monetary decrees, debt recovery claims, outstanding loan facilities, and rent claims including interest and penalties against the company as at March 2, 2020 would be paid in accordance with the CVA.
Justice Mabeya noted that the company has failed to implement the provisions of the CVA as no creditors have received any form of payment and the supervisor has failed to call the periodic six month’s creditors meeting.
“With such failure, the default clause in the CVA has kicked in,” Justice Mabeya said.
The court said the supervisor waited for a year and a half later to hold what he termed as a creditors’ meeting and made an attempt to vary and revise the original CVA.
