After giving up their pursuit of Sh6.6 billion debt, NCBA Group and Co-operative Financial Institutions have turned over an agency they had taken from Comcraft Group, owned by billionaire Manu Chandaria.
To reduce their multibillion shilling debt, the banks last year appointed a receiver supervisor for Kaluworks, one of Kenya’s leading manufacturers of aluminum kitchenware and roofing sheets, and defend its assets. Restructuring required the lenders to inject Sh750 million to revive the company due to difficulties finding a buyer for the company, but the lenders opted to return the firm back to Chandaria’s Comcraft Group.
The chairman of Comcraft and industrial tycoon Mr. Chandaria suffered a rare setback when Kaluworks was placed under receiver manager Pongangipalli Rao. Commercial banks are choosing private settlement over the forced auction of property seized from loan defaulters due to Kenya’s weak economy, which has driven asset prices below the minimum bid value required by law.
Industrial banks are choosing personal settlement over forced public sales of property seized from mortgage defaulters after Kenya’s stable financial system reduced asset costs below the minimum bid value mandated by law. As a result of the low minimum bid price, auctioneers will not be marketing as swiftly as they are repossessing. In exchange for raising the receivership, Kaluworks’ shareholders have agreed to pay the bankers Sh1.2 billion, with NCBA and Co-op Financial Institution choosing to cut their losses.
Co-op Bank has consented to lose 55 percent of the Sh9.1 billion loan while NCBA has agreed to an 88 percent write-off of their credit. The C-op Bank loan was valued at Sh4.8 billion when the company was placed under receivership by NCBA due to non-payment of Sh4.3 billion debt. According to the agreement, Comcraft Group would provide the company a boost of Sh150 million, offer NCBA Sh580 million, and give Sh628.4 million to Co-op Bank.
Several lenders, including I&M Bank, scrambled to find auctioneers and debt collectors to auction multimillion-dollar properties, including residential and commercial complexes, which had been used to guarantee loans for Kaluworks after the company failed to honor its commitments. This was months before the receivership was established. Stretching its cash flows and investing Sh1.8 billion to modernize its business in Mariakani, Mombasa, led to a worsening of defaults.
According to court documents, the firm had Sh1.3 billion in assets when it was placed into receivership in May 2021, but was buried under Sh12.6 billion in obligations, including bank loans, unsecured commercial paper holders, and shareholder advances. In order to restart the company, Mr. Rao offered the creditors the choice of injecting Sh750 million, leasing the business, or selling the assets. The administrator was unable to manage the company’s operations “in view of the lenders’ indisposition to grant further money,” Mr. Rao claimed. The company was then offered a bailout by shareholders, who contributed Sh1.2 billion to settle the debts and regain control and ownership.
A Bermuda-registered investment holding company controlled by the Comcraft Group, of whom Mr. Chandaria is the chairman and controlling shareholder, Kaluworks is a division of Clovis Company Limited.Mr. Chandaria, a well-known benefactor in Kenya, has already expressed his level of contempt for Kaluworks’ practices.
According to the bankers, they felt more at ease making the multi-billion shilling loan to the pots and pans producer because of Kaluworks’ connections to Mr. Chandaria.