Friday, July 19, 2024

Savannah Cement made losses for 5yrs in a row; owes KCB Sh. 8.9bn, Absa Sh. 5.2bn

KCB Group and Absa have a huge debt exposure amounting to billions of money in the struggling Savannah Cement that is currently under administration.

According to a report that appeared in a local business newspaper on Thursday, by the time Savannah was placed under administration, the cement maker owed KCB Bank Kenya Sh. 8.89 billion. It also owed Absa Bank (formerly Barclays Bank Kenya) Sh. 5.23 billion.

The loan owed to Absa Bank is in both the local currency and the US dollar unit. The loan charged in dollar totals USD16.45 million which is equivalent to Sh. 2.16 billion.

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According to the report in the newspaper, Savannah had secures the two mega loans by essentially offering all its assets as security. This meant that in the event of a default, both banks were empowered to move in and seize Savannah as a whole to recover the money.

According to Savannah’s administrator Peter Kahi from PFK Consulting, Savannah had made losses for five years in a row by the time it was placed under administration.

He revealed that the two debts owed to the two banks were not the only ones the cement maker had. Apparently, as at May 2023, Savannah’s total debts totaled Sh. 18 billion. This means that the two banks account for up to 78 per cent of the total debts.

NCBA

Absa Bank and KCB Bank Kenya were cleared by the High Court to appoint an administrator to manage Savannah Cement in May 2023.

Savannah Cement had applied to the court in May 2022 disputing the debt which at the time was estimated to be of over Sh. 7 billion owed to KCB Bank and over Sh. 3 billion owed to Absa. Court filings showed that the cement maker has defaulted on the loan repayment and KCB said interest alone stands at Sh. 297 million plus a penalty of Sh. 13.5 million.

Savannah’s director at the time Benson Sande Ndeta had admitted that the company had borrowed several loans from KCB and Absa, which it had been repaying.

NCBA

But in the process, he claimed that KСВ had allegedly increased the amount in breach of the in duplum rule, which bars banks from charging interest that exceeds the principal amount.

He had claimed that Savanna had asked KCB to provide it with a statement of account to ascertain how the balances went so high but the lender allegedly threatened to seize its assets.

Video: Man wails in Nairobi after losing loan money to agent who promised fake Canada job

He claimed that Savannah was coerced to repay loans of Sh. 5 billion by both KCB and Absa to forestall the seizure.

After getting the green light to place Savannah under administration, KCB and Absa had signed an inter- lenders agreement commiting to co-operate with each other in realizing the assets charged to them.

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