Nearly 300 Cytonn High Yield Solutions investors have filed an urgent application seeking to stay the liquidation orders granted by the High Court in January, calling it an “economic sabotage” that will lead to “irreparable harm.”
In the application seen by Sharp Daily, the intended interested parties led by Valerina Jiwa state that the liquidation orders fail to serve the interests of the nearly 4,000 creditors who stand to lose most or all of their investments in a drawn-out liquidation process.
“The creditors are thus prejudiced by the orders as liquidation will not only take years but expect that it will yield less than 14% or nothing of their initial investments,” said Valerina Jiwa in a supporting affidavit.
The creditors argue the application ending administration of Cytonn High Yield Solutions and placing it into liquidation was made without consulting the wider body of creditors.
“There was no consultation with the Creditors body concerning the intention to make an Application at the High Court seeking orders to terminate the Administration,” Jiwa said.
The creditors also allege the application was filed ultra vires, or beyond the powers, of the creditors committee appointed under administration orders in October 2021.
“The Creditors Committee was a creation of the Administration orders issued on 7th October 2021 that brought in Kerato Mirima as the administrator of the CHYS, hence their powers were confined to assist the administrator achieve the objectives of the administration,” Jiwa stated.
In the initial application of May 19, 2022, creditors sought only to change the administrator, not begin liquidation proceedings, the interested parties claim.
The administrator then applied for a one-year extension of administration on October 5, 2022, citing an agreement among creditors for a restructuring plan. The four creditors replying to this application also did not seek liquidation orders in their response, according to the claimants.
The creditors urgently seek a stay of liquidation to prevent the power of sale in loan defaults with priority lenders, which they say will leave no assets for distribution.
“There will be no property for the Liquidator or CHYS Creditors as priority lenders will have already exercised their power of sale due to a default in loan repayments,” Jiwa said.
The creditors also take issue with the court failing to consider debt restructuring plans in real estate assets approved by the board of representatives.
“The Honorable Judge failed to factor in that there were arrangements, approved by the Creditors themselves through the board of representatives, to try and settle debts through conversions and assignments on the real estate assets which had helped offset close to Kshs. 1 billion in debt,” according to the filing.
The investor group estimates the years-long liquidation process would likely yield less than 14% of their original investments. They proposed the court instead allow creditors to consider a Cytonn debt settlement plan that could restore 100% of principal in a shorter timeline.
“The creditors would like an opportunity to consider a plan that would realize 100% of their principal within a time that would be even shorter than the time it takes to achieve liquidation,” Jiwa said in an affidavit supporting the application.
The intended interested parties filed the urgent application without on October 27, 2023. They seek to convene a creditors meeting to examine a debt settlement proposal and vote on its adoption.
The creditors request the court appoint an insolvency practitioner of their choice if a settlement is approved to oversee its execution.
The High Court initially granted liquidation orders against Cytonn High Yield Solutions LLP on January 6 based on applications filed in May and October 2022.
Presiding judge Alfred Mabeya directed that the applications be served and answered within two weeks. The judge will provide additional guidance on the case on November 21.
“This matter coming up on 30/10/2023 on the Notices of Motion dated 12/10/2023 and 27/10/2023 before Honourable Justice A. Mabeya. And upon reading the supporting affidavit thereto, it is hereby ordered that the applications be served and be responded to within 14 days for directions on 21/11/2023,” Mabeya ordered.
