Billionaire David Langat.
The High Court has ordered fresh valuation of two properties belonging to businessman David Langat as the tycoon fights Stanbic Bank over a planned auction of his assets over a debt of Sh2.5 billion.
High Court judge Reuben Nyakundi directed the valuation to be conducted within 45 days from the date of the ruling.
The businessman had contested the valuation quoted from the tea estate in Nandi County and another property in Mombasa. The tea estate measures about 1,342 acres and has plants and machinery.
The bank had contracted Ascendas Kenya Limited to value the properties and in a report on July 3, 2024, the property in Mombasa was valued at Sh238 million at market value and forced sale at Sh178.5 million.
The market value for the tea estate in Nandi was valued at Sh2.42 billion and forced sale at Sh1.821 billion.
“That a declaration is hereby made for a fresh valuation of the charged properties by a professional valuer given the differentia minimum noticeable in the reports shared with the court,” said the judge.
At the same time, justice Nyakundi put a freeze to the planned auction saying the businessman would suffer an irreparable injury if the forced sale was not stopped.
The judge said the socio-economic implications of an immediate sale cannot be ignored, although the bank’s statutory power of sale should not be lightly interfered with.
However, the circumstances of the case presented exceptional factors warranting judicial intervention.
“The potential impact on over 5,000 individuals directly dependent on these operations, coupled with the community services at stake, elevates this matter beyond a simple creditor-debtor dispute,” said the judge.
The judge further noted that the businessman through his companies was negotiating with plans to dispose of his properties in Tanzania to settle the loan.
Justice Nyakundi further ordered fresh valuation of the assets in Mombasa and tea estate in Nandi County, within 45 days from the date of the ruling.
The judge said during the intervening period, the bank has the right to be repaid the loans advanced to the businessman.
“Nothing during this period shall restrain the Plaintiff (the businessman) from meeting his obligations on agreed terms pending the hearing and determination of the contested issues as highlighted,” said the judge.
The businessman through his companies DL Koisagat Tea Estate Limited, Koisagat Tea Estate Limited, Koifan Developers Limited and Firefox Kenya Limited rushed to court in 2023 after the bank put up for sale his properties in Mombasa and Nandi counties to recover a loan advanced to him.
Businessman David Langat. FILE PHOTO | NMG
The tycoon was worried that the sale by Garam Auctioneers would have far-reaching implications, noting that its impact might affect over 359 staff members and 5,423 farmers, alongside essential community services including schools and hospitals.
Evidence tabled in court showed that the businessman borrowed a loan of $16,129,427 in April, 2020 at an interest rate of 9.25 percent per annum.
The agreement stated that the loans would be repaid within 120 months.
According to the tycoon, the loans were aimed at restructuring and consolidating DL Koisagat Tea Estate Ltd’s existing facilities with the lender, a term out hardcore overdraft facilities, taking over the loans from another of his firm’s and capitalize arrears in the sum of $1,303,922.
However, in operating its business, the DL Koisagat Tea Estate Ltd was faced by numerous challenges including a bleak economic climate caused by fluctuations in the dollar rate and overproduction of tea and government interference with tea pricing leading to the collapse of the tea industry.
Graphic | Chrispus Bargorett | NMG
The tycoon further blamed adverse effects arising from the covid-19 pandemic and the Russia-Ukraine war, noting that Russia was a key importer of Kenyan tea, among other issues.
Cognizant of the challenges faced by the tycoon and the lender restructured the facility multiple times.
After the restructuring proved unsuccessful, the lender commenced enforcement action over the charged properties, to recover the sums owed to it.
Stanbic Bank then instructed the auctioneer to advertise the sale of the charged properties. The intended auction was scheduled to take place in early August 2023, but it was temporarily stopped by the court.
The court was informed that the parties entered into a Standstill Arrangement in September 2023, which provided for various obligations to be met by all the parties in the case.
Among the issues agreed was for the tycoon to make monthly payments of Sh12.5 million per month.
The tycoon was also to sell his various assets in Tanzania. The agreement further required the parties to come up with a sale strategy and transaction approach, identifying and shortlisting potential buyers and facilitating potential buyers’ due diligence.
The court heard that an independent transaction advisor- KPMG East Africa- was appointed to assist in the sale of the assets in Tanzania.
Mr Langat said a sale and purchase agreement (SPA) for the purchase of the Tanzania assets was to be concluded within three months.
However, the sale of the Tanzania assets was dependent on the obtaining of requisite regulatory approvals required.
The tycoon, however, encountered difficulties in the planned sale of the assets in Tanzania.
The tycoon then thereafter entered into a series of what he termed as good faith negotiations to enable his firms to meet its obligations under the agreement.
Based on the frustration experienced in performing the agreement, the financial challenges faced by the tycoon, and the series of engagements between the parties, the businessman said he was confident that the lender would appreciate its circumstances and was being accommodative.
He said he was therefore, shocked to find out on August 26, 2024, that the lender had re-advertised the sale of the property in Mombasa property registered in the name of Koifan Developers Limited.
The lender opposed the application and asked the judge to direct the tycoon to pay Sh12.5 million per month from August 30, 2024 as a condition to stop the sale.
Stanbic Bank said it had accommodated the businessman multiple times by restructuring the facilities and after the restructuring proved unsuccessful, it resorted to the auction.
The lender said the businessman and his firms should not be allowed to walk away from the bargain of the terms of the agreements they entered into.
The bank said it was a stable bank and there is no suggestion that it would be unable to compensate the tycoon in the event they are successful at trial.
The lender urged the court to allow the auction to proceed.
