Economy

Auctioneers sell ex-Nakumatt CEO Lavington home

SHAH

Mr Atul Shah. FILE PHOTO | NMG

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Summary

  • Justice Francis Tuiyott dismissed the petition by the administrator of the collapsed Supermarket chain, saying it has no chance of success.
  • Nakumatt’s court-appointed administrator had opposed the sale on grounds that the auction failed to follow the law, and tagged Mr Shah as an interested party to suit.
  • The bank, through Leakey Auctioneers, early in the year quietly sold the property, which Mr Shah had used as additional security as Nakumatt’s guarantor.

The chief executive officer of the fallen retail giant Nakumatt, Atul Shah, has lost his Lavington home to auctioneers after the High Court dismissed a petition seeking to overturn the forced sale of the high-end property by KCB Group #ticker:KCB over a Sh2 billion debt.

Justice Francis Tuiyott dismissed the petition by the administrator of the collapsed Supermarket chain, saying it has no chance of success.

Nakumatt’s court-appointed administrator had opposed the sale on grounds that the auction failed to follow the law, and tagged Mr Shah as an interested party to suit.

The bank, through Leakey Auctioneers, early in the year quietly sold the property, which Mr Shah had used as additional security as Nakumatt’s guarantor to offer comfort to the multiple bank loans.

“This court is not persuaded that the suit, as currently presented, demonstrates a prima facie case with a probability of success. Being unable to surmount that hurdle, it is needless for this court to discuss other aspects raised in the application,” the judge said.

KCB had earlier sold Mr Shah’s prime property in Industrial Area, Nairobi, to Furniture Palace International Ltd for Sh1.04 billion, court records show.

Nakumatt, which grew from a mattress shop in a rural town to have branches across Kenya and East Africa, was forced to shut down last year as it struggled to repay its suppliers, landlords and other creditors.

Banks owed billions of shillings by the collapsed retailer are fighting over Mr Shah’s personal property to recover the unpaid loans.

While the banks advanced Nakumatt billions of shillings on the strength of the retail chain’s cash flow, Mr Shah also offered his personal properties as guarantees for swift disbursements of the credit.

The Lavington home was offered as security in 2011 and accounted for Sh25 million in the multi-billion shilling loans.

The sale of the personal property marks a new low for Mr Shah, who for decades occupied the corner office of the regional retail business.

This prompted global institutions like Financial Times to name the former Nakumatt CEO as one of the top 50 influential businessmen in the world, alongside Equity Bank’s James Mwangi and Nigeria’s leading industrialist Aliko Dangote.

After the Nakumatt empire collapsed, the 59-year-old entrepreneur has remained in the shadows, never uttering a word in response to the unrelenting media coverage of the business’ miseries.

Justice Tuiyott wondered why the court-appointed administrator, Peter Kahi, was the one fighting to reverse the auction and not Mr Shah.

“No good reason has been demonstrated as to why matters which truly belong to his corner (Mr Shah) must be urged by the principal debtor without his participation as a substantive party,” said the judge.

Mr Shah was listed as a proposed interested party in suit brought to court by Mr Kahi.

The administrator argued that KCB had not issued Mr Shah with the notice for auction, disputed the computation of loan and maintained that the Lavington home was not used as security for the bank loans.

Nakumatt closed shop in January with debts estimated at Sh30 billion -- including Sh18 billion to suppliers, Sh4 billion to commercial paper holders and the rest to banks, who are more aggressive in pursuing their unpaid loans.

Regulatory filings indicate that Nakumatt owed DTB Bank #ticker:DTK Sh3.6 billion, Standard Chartered #ticker:SCBK Sh900 million, KCB Sh1.9 billion, Bank of Africa Sh328 million, UBA Sh126 million and GT Bank Sh104 million.

Mr Shah says in court papers that some lenders offered Nakumatt loans with an eye on his properties and that the banks were reluctant to support its rescue plan.

Creditors of the supermarket chain voted to wind it up after it failed to repay debts following a failed rescue attempt.

After the vote, the banks started to identify properties and bank accounts linked to Mr Shah, especially outside Kenya, with a view to seizing and recovering the billions of shillings owed to them.

The local assets include shopping malls, office blocks and prime land in Nairobi, Mombasa and Nakuru — where Atul’s father started Nakumatt as a retail shop.

The properties are owned by third parties linked to the Shah family, which holds the bulk of Nakumatt shares, according to a document prepared by the retail chain’s court-appointed administrator.

The Directorate of Criminal Investigations’ Anti-Banking Fraud Unit is also investigating Nakumatt for alleged theft and money laundering.

In its heyday, the company, which began life as Nakuru Mattresses, had more than 60 outlets across Kenya, Uganda, Tanzania and Rwanda, before it was brought down by poor management and debt-fuelled rapid expansion.

But its financial problems led to empty shelves and store closures that eventually culminated in its demise.