Category Archives: receiverships

Equity to absorb Spire Bank

Kenya’s smallest bank will wind up banking operations in a deal that transfers most of its business to Kenya’s second-largest bank, by market share.

A notice by Spire Bank states that all its depositors, except its main shareholder, will become customers of Equity Bank Kenya. Spire had 20,000 depositors, with about 3,700 loan customers and an equivalent of Kshs 1.32 billion of deposits will be transferred to Equity along with loans worth Kshs 945 million.

Equity term the transaction as “immaterial” to their group financial statements as it only adds 0.25% to their deposits now at Kshs 522.7 billion, but which will ensure that Spire customers enjoy uninterrupted banking services. Spire will pay Equity a cash amount, estimated at Kshs 468 million, to bridge the difference in the loans and the deposits transferred.

As per the agreement, Spire will cease offering bank services and deal with its creditors and staff. Spire’s parent, the Mwalimu National Sacco, has over Kshs 60 billion in assets but will walk away from the ill-advised venture into banking – that never made a profit from when it was acquired as Equatorial Commercial Bank – confident that the exit decision is in the best interests of its customers and stakeholders.

edit January 24, 2023: Through a notice by the Governor of the Central Bank (CBK), the Government has approved the deal in which Equity Bank Kenya is acquiring certain assets and liabilities of Spire Bank, effective on 31 January 2023.

edit February 1, 2023: Equity and Spire announced the completion of the deal transferring deposits and loans between the two banks and inviting customers of Spire to access their deposits at Equity.

  • Equity published a notice to guide the transfer of customers at 10 branches of Spire to specific branches of Equity.
  • On the same day, Spire issued redundancy notices to all its bank staff. Spire Bank will not continue its banking operations and is offering all its employees one month’s salary for every year worked as severance, payment for leave days not taken, and pension dues. The minimum payout will be Kshs 300,000. Employees will also get a 25% rebate on loans and the medical cover will run for another six months to June 30, 2023.

edit February 1 2023: The Competition Authority cleared the deal on the condition that Spire shall pay redundancy benefits to both unionized and non-unionized employees if it does a voluntary liquidation. Note Spire branches are now closed.


Nakumatt Folds

The Daily Nation today (December 17) has a story about the closing of Nakumatt after efforts to revive it appear to have been abandoned. The Nation has learnt that the chain has now sold what was left of the six branches to rival Naivas Supermarket in a deal that will see the Nakumatt brand completely disappear by the end of the year.

The last five years have been a roller-coaster period for Nakumatt. Here are some highs and lows taken from news reports and press releases.

May 2014: Nakumatt opens its 46th branch in Kitale and its third in the North Rift area – a Kshs 140 million investment, located at the new Mega Centre mall.

August 2014: Nakumatt opens its 50th branch in Arusha, Tanzania.

July 2015: Nakumatt unveils its store at the refurbished Westgate mall that had been closed following a terrorist attack in September 2013. The media tour will be followed by a tree planting session at the new Mwanzi-Kabete road link recently developed by Westgate Mall Management in association with the Nairobi City County, to ease traffic flow.

March 2016: Nakumatt opened its 59th store at Kakamega and its second in that town. That month, Nakumatt also opened Sports Planet, a sporting gear store at Westgate.

May 2016: Nakumatt opened its 60th and 61st branches respectively – at Emali town along the Nairobi-Mombasa Highway and in Nairobi’s Kitisuru suburb.

December 2016: Nakumatt management projects having a good festive season stretching from Diwali through Christmas, with expectations to improve sales by 34% over the previous year at their 62 branches across East Africa. They later opened their 63rd store, a 60,000 square foot space, at the new NextGen Mall in Nairobi located on Mombasa Road to serve customers in the South B and South C areas. They are also at an advanced stage to open a 64th one in Kigali, Rwanda.

October 2017: The directors of Nakumatt Holdings apply to the High Court on October 30 for the company to go into voluntary administration under the Insolvency Act. They propose that Peter Kahi of PKF Consulting be appointed as an Independent Administrator to turn round the business and work with Nakumatt’s creditors. The directors chose this route as the administration will enable Nakumatt to be maintained as a going concern and to continue to trade and generate revenue to meet its ongoing financial obligations. Under the Act, while a company is under administration, there is a moratorium on certain legal processes, including a moratorium against enforcement of security over the company’s property. 

The notice reads that rival Tusker Mattresses (Tuskys) has undertaken to investment in and merge with Nakumatt. Also, that banks are supportive of this move and the Competition Authority of Kenya has been notified of the Tuskys deal.

December 2018: Nakumatt moves into a smaller 40,000 square foot store that they had first occupied in 1989 at Mega Mall, along Uhuru Highway. This is in the building next to their former “Mega hypermarket” that was one of their flagship stores. Nakumatt now operates just seven restocked branches in Nairobi, Nakuru and Kisumu under a business recovery programme dubbed Nakumatt BounceBack, that is supported by scores of local and international suppliers keen on seeing the firm back on track.

September 2019: A second meeting between the Administrator and Nakumatt’s creditors fails to happen as the financial audit of the firm for the years 2017, 2018 and 2019 have not been completed. Earlier the Court had directed an audit be done, and the firm of Parker Randall Eastern Africa had been selected after a bidding process. The Administrator also disclosed that four stores operating at break-even levels, a status that the other two would attain by year-end.

January 2020: 92% of Nakumatt creditors voted on Tuesday January 7 to dissolve the supermarket chain. A liquidation plan was presented by Peter Kahi, the court-appointed administrator who said any further efforts would be very costly. The creditors are owned Ksh 38 billion and the administrators will share about KSh422 million received from the sale of six Nakumatt branches to Naivas. Diamond Trust Bank (DTB) KSh3.6 billion, KCB Group Ksh1.9 billion, Bank of Africa KSh328 million, UBA KSh126, Guaranty Trust Bank KSH104 million. Brookside Dairy Limited KSh457 million, Outstand Logistics Limited KSh415 million, Norkan Investments KSh338 million, New KCC KSh290 million, Redstar International KSh261 million. – Via Khusoko

Others: See also posts from when Nakumatt fought against tax evasion claims in June 2006 by releasing some never-seen financial numbers, and when an equity deal was formulated in November 2016.

Ghana bank reforms continue

Continuing banks reforms in Ghana, from back in 2018, the Bank of Ghana issued a new statement (PDF) on the state of banking in the country for the end of that year.

It stated that they had inherited a system with distressed banks that were not adequately capitalized, and which had high non-performing loans, and cases of insolvency and illiquidity – largely a result of poor corporate governance, false financial reporting, and insider dealings.

They noted that they had revoked seven licenses and arranged for those banks to exit in an orderly way and that after a recapitalization push, there were 23 banks with universal banking licenses in Ghana that had met the minimum paid-up capital of GHF 400 million (~$83 million) at the end of the year.

Excerpts:

  • The Bank of Ghana had approved three merger applications – (i) of First Atlantic Merchant and Energy Commercial banks, (ii) of Omni and Sahel Sahara banks and that of (iii) First National and GHL banks, as pension funds had invested equity in five other banks through a special purpose holding company called the Ghana Amalgamated Trust (GAT).
  • Another bank, GN Bank, was unable to comply with the capital requirement and its request to downgrade, from a universal banking license, to a savings and one had been approved. 
  • The Bank of Baroda has divested from Ghana following a decision by its parent bank which is wholly-owned by the Government of India. Subsequently, the Bank of Ghana has approved its winding down plan and allowed all the customers, assets and loans of Baroda Ghana to be migrated to Stanbic Bank Ghana.
  • Two other banks Premium and Heritage had their licenses revoked, and a receiver manager from PricewaterhouseCoopers appointed to take charge of the banks. Premium was found to have been insolvent while Heritage had obtained its license in 2016 on the basis of capital with questionable sources. All deposits of the banks were transferred to Consolidated Bank and the Ghana government has issued a bond to support the transfer of assets.

EDIT August 16 2019: The Bank of Ghana revoked the licenses of 23 insolvent savings and loans companies and finance house companies as well as 2 non-bank financial institutions.

The regulators had assessed the savings and loan and finance house sub-sectors and found challenges of low capital, excessive risk-taking, use of depositor funds for personal projects, weak corporate governance, creative accounting and persistent regularity branches and non-compliance.

The institutions are Accent Financial, Adom S&L, Alltime Finance, Alpha Capital S&L, ASN, CDH, Commerz S&L, Crest Finance, Dream Finance, Express S&L, First Allied, First African, First Ghana S&L, FirstTrust, Global Access, GN S&L, Ideal Finance, IFC, Legacy Capital, Midland, Sterling Financial, Unicredit Ghana and the Women’s World Banking Ghana S&L .

Top Imperial Bank Depositors to received end with 35% of funds

EDIT April 5, 2019: CBK and KDIC announced that they have accepted a final and revised offer from KCB for Imperial Bank that is 19.7% over and above the 35% recovery announced in December 2018. The remaining depositors of Imperial will be paid 12.5% of the funds with the signing of the agreement, 12.5% on the first anniversary and then 25% over the subsequent three years during which their funds will earn interest.

KCB will take over five branches of Imperial as KDIC and CBK will explore further options for the remaining branches (Earlier it been announced that NIC bank would take over Imperial’ s branches). The deal excludes Kshs 36 billion (~$360 million) of loans that are being pursued through litigation in the courts.

Original December 16, 2018: The Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation announced the conclusion of the Imperial Bank receivership that will probably not satisfy customers who still had vast sums deposited at the bank that was suddenly closed in 2015.

KDIC and CBK announced  they had accepted a modified biding offer from KCB, Kenya’s largest bank for Imperial Bank (in receivership) that comes with a payment of 12.7% of the balances that were owed to the remaining depositors.

Since making a first payment in three years ago through KCB and Diamond Trust, of up to Kshs one million that took care of most of teh small depositors, further payments have been availed  to larger depositors. But with the acceptance of the offer today, they will have only accessed 35% of the deposits held in the bank when it was placed under receivership, with the balance of the funds now uncertain.

A loan verification process will be done through teh first quarter of 2019 after which depositors may be able to receive more of their funds

The collapse of the bank started in the days after the the sudden death of its Managing Director, after which revelations of fraudulent accounts he managed, secret off-the-book loans, fishy undocumented cash transfers came to light.

EDIT: In September 2020, the Competition Authority of Kenya approved a transaction transferring of listed assets, including Kshs 31.7 billion of deposits, loans and securities together with all rights, titles and interests to KCB Bank Kenya.

EDIT: December 9 2021: The Central Bank of Kenya (CBK) has appointed the Kenya Deposit Insurance Corporation (KDIC) to liquidate Imperial Bank (in Receivership). CBK noted that 45,700 (92%) of Imperial’s 50,000 customers had been compensated in full over four years and that a recent audit report commissioned by KDIC had concluded with a recommendation that they proceed to wind down Imperial and pay depositors in due course. 

Flowers by the Lake: Karuturi and the Bankers

Kenya is known as one of the giants of the giants of the fresh flower world, producing roses, lilies and other carnations that are freighted around the world to be used as gifts, tokens of affection, and to spruce up weddings, offices and restaurants.

A large share of these flowers come from farms around Lake Naivasha, a tiny lake in the Rift Valley of Kenya about 90 kilometers Northwest of Nairobi.  Many of the farms are on Moi South Lake Road, which is also where most of the picturesque Naivasha tourist lodges are also located. The road is a bumpy, potholed road, one which seems illogical given the investments on each side of the road, that run into tens of millions of dollars of lodges interspersed with flower farms, that neighbour each other for almost ten kilometers. In between are small ramshackle town structures that are a common peri-urban feature across the country housing bars, chemists, mobile money agents and other shops. There are also schools named after flower companies and you may spot hundreds of school children playing football or lounging at break time as other kids walk towards their homes, along the road which has sparse traffic of flower company buses and land cruisers and minivans ferrying tourists to different lodges, with familiar names like Simba, Enashipai, Sopa, Pinkman, Crayfish and Crescent. There are also signs for land for sale, usually on the left side of the road, away from the prime lake shore and some with unfinished building structures, outcomes of a dream sold years ago of Naivasha as a place to buy a holiday home.

Then there appears a large group of greenhouses, on the right side of the road, the preferred side. But unlike other farms you have passed, you can see past the ever-present Naivasha thorn bushes and security fences, that the greenhouses plastic walls and roofs are torn, flapping in the wind.. Inside the compound looks overgrown, and devoid of busy activity at other flower farms.

This is Karuturi, a farm that has spawned a long-running case in the Kenya courts. It is not the longest, not by far.  If you spend time in Kenya’s courts you will discover there are cases, commercial and civil, that stretch as far back as ten, twenty, and even thirty years.

The case, Civil Suit No. 78 of 2014 of Surya Holdings, Rhea Holdings and Karuturi Limited, against CFC Stanbic Bank collectively known Karuturi case is a unique one. One that has roped in banks in Kenya and India, landowners, flower pickers, workers unions, schools, two receiver managers, audit firms, suppliers and government agencies.

 A summary of the case events:
  • December 2012: Stanbic advances facilities to Karuturi; with the main loan to be repaid over five years. The facilities are secured by guarantees from directors of Karuturi as well as Rhea Holdings and Surya Holdings, related companies which are the registered owners of the land parcels the farm was situated on, The first repayment was made in January 2013 but then none was made for the next three months in succession.
  • January 2014: Stanbic obtained an advisory opinion which showed that the Karuturi farm was insolvent, its financial accounts were questionable for 2012 and it appeared the directors of Karuturi had abandoned the farm. They advised that putting the farm under receivership was the only way to stop further degradation of the assets. as the farm had stopped sales and production of flowers at Naivasha in August 2013.
  • February 2014: Stanbic places Karuturi in receivership and appoints Kieran Day and Ian Small as Receivers and Managers.
  • February 2014: Receivers advised the bank to move to dispose of the farm as soon as possible and to preserve assets by continue trading.
  • March 2014: Karuturi sues to challenge the appointment of receivers and stop the sale of the charged properties.
  • June 2014: Court rules that the appointment of receiver managers was proper. It also restrains the receivers from selling the charged properties (Rhea’s LR 10854/60 and Surya’s LR’s 12248/20, 12248/21, 12248/38, 25261 and 25262)
  • Karuturi was reported to have been relocating to Ethiopia in March 2014  in what was seen to signal a loss for Kenya as a preferred flower growing powerhouse.
  • October 2014: The Receivers create a company called Twiga BV to facilitate the sale of Karuturi flowers to the Netherlands and to receive revenue in order to pay expenses, staff and suppliers of the business. This came after Karuturi BV had been declared insolvent.
  • October 2015: One of the Receiver Managers is relocating from Kenya and the firm resigns. The bank appoints Muniu Thoithi and Kuria Muchiri of PWC as the new receiver-managers. Twiga was transferred to the new receivers at the end of 2015.
  • March 2016: In a hearing of a case filed to wind up Karuturi, and with lawyers for Polythene Industries, Agility, Ivaco, Inter Label, ICICI and Stanbic, the lawyers for Karuturi side with the winding up clause and allowed this process to proceed.
  • October 2016: A High Court judge finds that Karuturi had admitted (in March 2016) that they owed the bank $4M and Kshs 2.7 million before the receivership and that Surya and Rhea had provided securities to secure this debt. The court also directs that an independent forensic audit be done on business and operational transactions during the receivership period and look at items such as the expenses paid by the bank, repayments by Karuturi to the bank, balances outstanding, exports and production, payments to workers, tax payments, status of assets bought or sold during the receivership inventories, and compare the performance of the company between 2007-2012 to the receivership period.
  • November 2016: The suit parties settle on Deloitte to do the audit.
  • August 2017: Karuturi applies to the court seeking to pay $3.8M and Kshs 2.7 million within sixty days and have the bank release the land titles of Surya and Rhea.
  • October 2017: The audit report to the court reveals that, in addition to the debt owed before the receivership of $6.2M, another $9.4M had been spent during the receivership. The audit showed that 403 million good quality roses had been harvested (between February 2014 and May 2016), 2% of which could not be accounted for. Altogether in 2015 and 2016 Twiga received $23.6 million and paid $23.5 million for vendor expenses and administrative functions. Also, the assets of the company were intact, contrary to a Karuturi claim that the receiver managers had run down the assets of the company and it dismissed many of the accusations of Karuturi including that on transfer pricing and found that the receivers had not engaged in misconduct. The audit also found that the last known date of production at the farm was early in May 2016 and that the farm was descending into disrepair as costs continued to be incurred in preserving it.
  • October 2017: ICICI Bank of India wins a separate demand for $40 million from Karuturi.
  • January 2018: Courts rule that the receivership was proper and that Karuturi directors should pay the pre-receivership debt of $4M and Kshs 2.7 million, with interest, within 60 days. Also that, within 90 days, they are to pay $6.3M owed to creditors during the receivership and $6.7M advanced by the bank during the receivership period up to December 2016 and another $0.97M of receivership expenses incurred the following year to July 2017.
  • March 2018: Reports that an American company, Phoenix Group, has invested an undisclosed sum, said to be $2 billion, in Karuturi Global to help it pay its debts and revive its Kenya operations.

  • May 2018: The Receiver Manager of Karuturi (in liquidation) puts the movable assets of the company on sale. These include 1,400 steel greenhouses, vehicles, refrigeration and irrigation equipment. The land they occupy at Moi South Rd, Lake Naivasha is not part of the transaction.
  • Later in the month, Karuturi appealed against the court judgment and sought to terminate the receivership and also stop the sale of assets.

  • September 2018: The case is due for hearing this month. In the meantime, Kenya has enacted new company laws and insolvency laws. The main difference is that whereas before a receiver manager would act in the interest of the bank, they are now mandated to act on behalf of the bank and all creditors of the company.