Sh871m KCB loan defaulter Spencon put under receivership

A road construction firm that owes KCB Group Sh871.2 million has been placed under administration of PricewaterhouseCoopers (PwC).

Spencon Kenya Limited was placed in the hands of PwC executives Kuria Muchiru and Muniu Thoithi effective December 8, according to a Kenya Gazette notice announcing the move.

“With the appointment, the powers of the administrators extend to all assets and undertaking of the company,” reads part of the notice.

“By virtue of the administration, the powers of the directors of the company in terms of dealing with the company’s assets have ceased.”

The notice also called on the company’s creditors, including former employees, to file their claims with the administrators who were appointed under the Insolvency Act, 2015.

Mr Thoithi specialises in forensics and business recovery services at PwC while Mr Muchiru leads the consultancy’s human resources services with a focus on interim leadership.

KCB Group declined to comment on the matter, citing customer confidentiality. Besides the bank, Spencon had also been sued by several other creditors including lenders and sub-contractors seeking millions of shillings.

Spencon’s administrators declined to comment on the scope of claims from creditors. It was not immediately clear who made the move to place Spencon under administration.

The law, however, provides that such a decision can be undertaken by a court on the petition of a creditor to whom the company has pledged a substantial part of its assets. A company’s own directors can voluntarily hand over its management to administrators.

The objectives of administration include maintenance of the company as a going concern and compensation of creditors from cash flows or liquidation as a last resort.

“The objectives of the administration of a company are the following … to realise the property of the company in order to make a distribution to one or more secured or preferential creditors,” reads part of the law.

Spencon took a loan of Sh802.5 million from KCB in August 2008, with the debt secured by its directors’ personal guarantees and several properties.

The lender in May 2014 asked for the immediate repayment of the outstanding sum of Sh871.2 million, sparking a drawn-out legal battle pitting the lender against Spencon’s directors who later left the company after selling it.

Placement of the company under administration signals the stepped-up efforts by banks to settle bad debts that have plagued their balance sheets and income statements. KCB in July took over the running of Tahir Sheikh Said Unga Millers over an unpaid Sh1 billion loan.

Loan recovery efforts received a new impetus following the capping of lending rates, currently at 14 per cent, against higher levels at which some of the bad debts were issued. The Spencon loan, for instance, was issued at an interest rate of 17.5 per cent.

KCB’s total non-performing loans stood at Sh31 billion in September, rising from Sh24.5 billion the year before. Its loan loss provision, however, declined to Sh3.4 billion from Sh3.8 billion over the same period.

The lender’s net profit rose 16 per cent in the nine months ended September to ShSh15.9 billion, aided by higher interest income.

The banking industry’s bad debts surged to Sh170.6 billion in the first quarter of 2016, with defaults blamed on distressed real estate and a wave of corporate retrenchment.

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