The planned auction of Jacaranda hotel to recover a debt owed to GT Bank, which was scheduled for Wednesday, has been stopped.
In a consent recorded before the High Court, Jacaranda hotel agreed to look for financiers to take over the loan, plus interest within 90 days.
The planned auction of Nairobi’s Jacaranda Hotel, which is owned by the family of the late Cabinet minister and business tycoon Njenga Karume, has been put on hold for 90 days to give the family time to mobilise funds for offseting a loan owed to Guaranty Trust Bank (GT Bank).
In a consent recorded before Justice Wilfrida Okwany a day to the planned auction, the parties agreed that Jacaranda Hotel would process funds from NISK Capital or any other financier within three months. Other than the principal loan, the financier will also take over the interest and arrears, estimated to be Sh300 million.
And if the family fails to get the money as agreed, GT Bank will be at liberty to sell the hotel through public auction.
The sale was scheduled for January 22 but the hotel management had in December rushed to court to stop the process. The four-star hotel has 128 rooms and sits on 3.5 acres of prime land in the Westlands suburb.
In the consent, the parties also agreed that the management of the hotel and its advocates would co-operate with the bank and its lawyers, to challenge or lift the agency notices placed by the Kenya Revenue Authority (KRA).
The parties agreed to meet and engage on frequent basis in the presence of their advocates to prepare “a short road map lifting the agency notices”.
Further, the hotel was given 60 days to settle the bank’s valuers fee of Sh1 million and advocates fees of Sh3.54 million. The fees of Regent Auctioneers will be taxed by the Registrar of the High Court, the consent stated.
Documents filed in court showed that the hotel took a loan of Sh250 million from GT Bank in 2014 and 2015. The hotel at the same time took an overdraft of Sh50 million for working capital financing. The balance was amalgamated in May 2017.
The bank has scheduled auctions on two occasions - on October 5, 2018 and July 31, 2019 - but both failed to proceed after the hotel approached the bank with repayment proposals.
The promise has always been that the hotel would sell some properties belonging to the late Karume’s estate and use the money to offset the loan.
The bank, through an affidavit filed by legal officer Joan Aranga, said that the sales have never materialised and the accounts continue to fall into arrears. Further, she said the hotel had not made any efforts to lift the agency notice issued by KRA and the total amount due now stood at Sh283,663,515.
GT Bank said it had accommodated the hotel for more than two years but the promises to repay the loan after selling the estate’s properties had not been honoured.
Regent Auctioneers had last June notified the management of Jacaranda Hotel of the impending auction. The family had opted to sell one of its huge tracts of land under the late Karume’s name to clear the bank loan.
In 2018, the KRA had also lined up auctioneers to recover value added tax (VAT) and pay as you earn (PAYE) arrears amounting to Sh153 million owed by the hotel. The taxman issued Jacaranda Hotels Limited with an enforcement notice on January 12, 2018, seeking immediate payment of tax arrears amounting to Sh197 million and on the same day moved to secure goods at the hotel to recover the tax.
The matter was settled after KRA agreed to a repayment plan of Sh50 million in monthly instalments and payment of Sh7.9 million to auctioneers who had already secured the hotel’s property to recover the tax.