CfC Stanbic receiver manager Ian Small. He says Karuturi needs to be sold before June/July low season. Photo/FILE
What you need to know:
Receiver managers appointed by CfC Stanbic in February say Karuturi is insolvent and its survival is solely dependent on financial support by the bank.
The receivers argue that Karuturi can only operate as long as CfC is ready to finance it, disclosing that they are keeping it operational to get better market value by selling it as a going concern.
Naivasha-based flower firm Karuturi Limited is set for a fire sale by CfC Stanbic Bank that is seeking to recover its Sh383 million loan, papers filed in court by the lender have revealed.
Receiver managers appointed by CfC Stanbic in February say Karuturi is insolvent and its survival is solely dependent on financial support by the bank.
If the business is not sold by onset of the June/July low season for the flower industry, “the receivers will terminate trading with resulting unemployment and loss of value,” CfC Stanbic’s receiver manager Ian Small said in the court documents.
“In view of these unfavourable prospects the receivers will be advertising the business and assets for sale, imminently,” added Mr Small.
One of Kenya’s biggest large-scale flower farming concerns, Karuturi was put under receivership after financial difficulties that saw it fall behind in employee salary payments and servicing of the bank loan.
It is also said to be owing the Kenya Revenue Authority Sh744.6 million in unpaid tax.
The receivers argue that Karuturi can only operate as long as CfC is ready to finance it, disclosing that they are keeping it operational to get better market value by selling it as a going concern.
“Following a detailed review of the state of the business, we concluded that trading for a limited period of time could result in improved realisations for the bank and other creditors from a possible sale of the company’s business and assets,” said Mr Small.
Karuturi employs hundreds of workers who could lose their jobs in the event of a total collapse.
The filing by Mr Small is in response to a suit by Karuturi and its two sister companies, Surya Holdings Limited and RHEA Holdings Limited, seeking to lift the receivership on claims that CfC cannot sell off the land since it is a shared security between the Kenyan lender and ICICI Bank of India.
Karuturi further said the receivership is in breach of a court order issued in October after another suit where All Pack, a supplier, sought a winding up petition.
Abusing courts
But receivers accused Karuturi of abusing the court process by filing a fresh suit when its initial application seeking similar orders is still pending in court.
Mr Small further denied Karuturi’s claim that the receivers had halted operations, saying when they took over the employees’ strike had already halted operations.
He said they have since paid the employee arrears dating back to October and production and selling of flowers has resumed.
The receivers said when they took over the management, there were no farm inputs and 30 per cent of the green houses were damaged, which they claim have since been rectified.
Karuturi had in its application said the assets used as security with CfC Bank are valued at Sh7.8 billion ($90,951,630). The same assets have been used under a ‘securities sharing agreement’ to secure Sh3.44 billion ($40 million) from ICICI Bank.
CfC is accused of failing to harvest and export flowers since the takeover in a bid to devalue the firm for planned sale to politicians and well-connected businessmen, , leading to a loss of Sh11.5 million. The receivers denied this.
They say the firm has been run down and is heavily indebted to several suppliers.
The bank argues that at the time Karuturi was placed under receivership, Kenya Power had disconnected electricity to the flower farm over a Sh1.5 million power bill.
