Savannah Cement factory Debt-ridden Savanna Cement will enjoy a slight relief after a court blocked KCB Group and Absa Bank from seizing its assets pending the determination of a review it filed at the High Court.
Savanna was granted a temporary order barring any seizure of its assets and the banks from appointing an administrator or liquidator to manage its properties.
Justice Alfred Mabeya directed that the status quo be maintained until the court issues further directions. “For the avoidance of doubt, the status quo is that no peremptory action whatsoever should be taken until the aforesaid date,” Justice Mabeya ruled.
The cement maker had rushed to court to stop plans by the two lenders from seizing its assets over debts that are running into millions.
The judge also ordered Savanna to pay Absa Sh10 million within one week from the date of the ruling to avoid the seizure of its assets.
The injunction comes after an earlier application by the embattled firm was rejected by Justice Wilfrida Okwany but it claims that it wanted the judge to disqualify herself from the case over undisclosed reasons before the ruling was delivered.
Justice Okwany stated that the cement maker admitted that it owes the two banks a substantial amount of money and the banks, being the parties on the receiving end, were likely to suffer huge losses.
But Justice Mabeya inhis ruling directed the matter to be handled by Judge Abigail Mshila.
Court documents show that Savanna has defaulted on the loan repayment with KCB interest now standing at Sh297 million, including a penalty of Sh13.5 million.
Benson Sande Ndeta, who is the director at Savanna Cement, admitted that the collapsing firm took several loans from KCB and Absa, which it has been struggling to repay.
Mr. Ndeta said the company was figuring out ways to repay the debt as he pleaded with the two lenders to restructure the loan repayment terms.
He also accused KCB of increasing the amount in breach of the ‘in duplum rule’, which bars banks from charging interest above the principal amount.
The firm claims it requested KCB to furnish it with a statement of account to ascertain how the balances reached unbelievable levels, but the bank declined and threatened to seize its assets.
Ndeta stated that the cement maker was coerced to repay loans of Sh5 billion by KCB and Absa to forestall the seizure. He added that the looming recovery was in breach of the firm’s rights and a sinister move by the banks to enrich themselves unjustly at the expense of shareholders.
Savanna also argues that it will suffer huge losses that cannot be compensated since the banks are eying assets that might never be recovered, including machinery and land.
It added that it has several contracts to supply cement to various government projects, which will automatically be terminated if the banks are allowed to seize its assets.
The director said the company should be given more time as it is currently struggling to fund its clinker project, which allows it to raise sufficient funds and clear the debts.
Mr Ndeta said the company has proposed to pay the balance after it is given the statement for verification.
The poorly managed Savanna Cement had its Athi River giant plant temporarily shut down for one month in 2021 when its financial problems worsened.
It has also been hit by ownership wrangles and protracted court battles in recent years, leading to the Court of Appeal quashing the appointment of new directors in May 2021.
It opened the Athi River grinding plant, then sacked 21 senior employees and the then managing director, Ronald Ndegwa, who was not in the good books of the cartels.