A couple of years back, the mighty and famous Nakumatt supermarkets chain went under. The retail chain had dominated the industry for years and few could have predicted its downfall.
Today, Nakumatt is just among the many supermarket chains that had to close down operations in Kenya.
Atul Shah, the former CEO of the company used one property to borrow from multiple lenders. By doing this, Shah ensured that only one lender can auction the property when he delays to pay.
Mr Shah used his company Collogne Investments, which owned the Ksh 2 billion property in Nairobi’s Nakumatt’s guarantor to the multiple bank loans. This ensured that the banks did not hold the property title as security because the main charge to the loans was the collapsed retailer.
Bank of Africa won the claim to the Ksh 2 billion property in court and will auction the asset on Monday to recover Ksh 700 million advanced to the collapsed retailer. Evidence provided in court also showed that the same property had been used as security to tap loans from other banks.
“The charged property is also charged to other banks and if the plaintiff does sell the same all other creditors stand a chance of losing their security and that the defendant bank is well secured by the charge over the charged property,” Mr Shah said in court papers.
Nakumatt closed shop in January with debts estimated at Ksh 30 billion -- including Sh18 billion to suppliers, Ksh 4 billion to commercial paper holders and the rest to banks, who are more aggressive in pursuing their unpaid loans.
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