Focus on Thursday court ruling over sale of troubled Karuturi
A worker in a flower farm. Karuturi was put under receivership in 2014 after it failed to meet its payments.
Business Daily | 1 May 2016
Focus on Thursday court ruling over sale of troubled Karuturi
By BRIAN WASUNA, [email protected]
After close to three years and many court cases in Nairobi and Nakuru, the curtains appear to be coming down on one of the world’s biggest players in the cut flower industry — Karuturi Limited — after its owners conceded to an application to wind it up.
Receiver managers Muniu Thoiti and Kuria Muchiru from PricewaterhouseCoopers (PwC) have asked the High Court to lift an order barring the sale of Karuturi’s property after the flower firm’s owners failed to object to its winding up.
The receivers want the orders barring the sale of Karuturi’s property lifted so that they can commence the liquidation process, which will see its assets sold off to settle creditors’ demands.
The High Court will give a final verdict on Thursday and creditors have two weeks to table debt claims.
Surya Holdings and Rhea Holdings — Karuturi’s parent firms — have aggressively fought the company’s winding up since 2014 when CFC Stanbic placed it under receivership for defaulting on a $4 million (Sh400 million) loan.
Difficult times fell upon Karuturi following the 2007-2008 post-election violence which affected several businesses countrywide, and the firm failed to pick itself up from these challenges.
The receiver managers now say that all efforts to get Karuturi back on its feet have failed and the only card they have left to play is to call it a day on what was once Kenya’s largest flower firm.
Mr Thoiti and Mr Muchiru who were appointed to replace Ian Small and Kieran Day say in their application that they have been unable to elicit a response from Karuturi’s shareholders in calling for capital injection.
They add that CFC Stanbic has since 2014 been forced to inject more funds into the collapsed flower firm, but the lender has washed its hands off Karuturi.
“The company continues to be loss-making and as such continuation of trade is not possible. The bank has notified the receiver managers that it will no longer continue to fund the operations of Karuturi. The receivers have urgently sought capital contributions from the directors of the company but there has been no formal response,” Mr Thoiti says in an affidavit.
Mr Thoiti says they have supplied the firm’s directors with all of Karuturi’s books of accounts but that the owners are yet to come back with a solid offer from an investor.
“The dire financial situation facing the company cannot await the hearing and determination of the suit and the same amounts to sufficient reason to review the order (barring sale of Karuturi’s assets) so as to allow the sale of the charged assets or the enterprise,” he adds. The flower firm has several assets, most notably thousands of acres of land valued at well over Sh8 billion.
Karuturi also owns a health centre, three schools, staff houses and a host of farming equipment whose total value in shillings is also in the region of the billions.
The firm was in 2014 forced to surrender ownership of its football team, Karuturi Sports Club, which was at the time one of the teams in the Kenyan Premier League.
The team, Naivasha’s key sporting flagbearer, was acquired by fresh produce company Vegpro and consequently took after its new owner’s name.
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Its debts are also huge. Aside from the Sh400 million owed to CFC Stanbic, the firm is also engaged in a dispute with Industrial Credit and Investment Corporation of India (ICICI) Bank over a $19.9 million (Sh2.01 billion).
The taxman has not been left behind in the list of Karuturi’s creditors as the Kenya Revenue Authority claims Sh962 million in unpaid taxes.
The KRA claims Karuturi falsely stated prices while trading with its sister companies so as to evade taxes (transfer pricing).
READ: CfC Bank puts Naivasha flower grower Karuturi up for sale
Crayfish Camp has also demanded Sh500 million from the troubled firm, and last year filed a suit at the Nakuru High Court seeking to sell Karuturi’s assets to recover its debts.
Crayfish says the debt accrued from unpaid rent for a parcel of land it leased to Karuturi.
Workers on Karuturi’s farms are yet to be paid their dues in full as some salaries and allowances are pending. The Kenya Plantation Workers Union is yet to crunch up the numbers and come out with an exact figure of what employees are owed.
The health centre and schools are among the services that have not only benefited Karuturi’s 2,400 employees but more than 10,000 Naivasha residents who depend on the facilities. The end of the road for the company could mean that the facilities’ dependants may have to seek other options.
With creditors breathing down Karuturi’s neck, the flower firm has only managed to keep away from the jaws of death through the courtroom where several orders have been issued barring the company’s closure.
Cases filed in the Nairobi and Nakuru High Courts have been the main battleground where Karuturi has found reprieve, but may now be the venue it will take a final bow.
In Nairobi, Karuturi’s directors have, since 2014, viciously fought a winding up petition filed by Allpacks Limited, a creditor. They have also engaged CFC Stanbic in a suit seeking to lift the receivership since 2014.
But the receiver managers believe that awaiting the conclusion of the cases may only lead to deterioration of Karuturi’s assets, which will only erode the value of those which were used as security to secure the loan from the bank.
“Ideally if we are allowed to sell all or part of the charged assets it will enable us to realise value from the sale of the enterprise to meet receivership expenses, claims of the secured and preferential and to give any remaining monies to the persons entitled thereto,” Mr Thoiti adds.
The company’s owners claim that the previous receivers Ian Small and Kieran Day have, on several occasions, curtailed plans by investors and other banks seeking to take over CFC’s loan.
For the shareholders, it is a race against time, and the question is whether they will manage to find a buyer or another bank willing to buy out CFC’s loan in time.
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