How botched farm export business has soaked city tycoon in debt and misery
A few years ago, billionaire businessman Paul Wanderi Ndung’u went to Narumoru and established a large-scale project of farming herbs, vegetables, and fruits for export to Europe and the United Kingdom.
He must have been lured by the good weather, regular rains, and fertile soil in the area near the border of Nyeri-Laikipia counties, to invest and set up the project.
Sitting in the expansive plains between Mt Kenya forest and the Aberdare ranges, the project was doing well and had good prospects of growth and expansion.
The market of his products was stable and due to the unique tropical climate and weather conditions in Narumoru, production was equally steady.
He hired 350 people, whose livelihood and that of their families are at stake as they depended on Mr Ndung’u’s commercial farming, which is set to be auctioned by a bank over a debt of Sh664 million.
Equity bank loan
So good was the business that in 2019 Mr Ndung’u’s farming business company, Simba Fresh Produce Limited, approached Equity Bank for a loan to expand the acreage of the farm.
The company was advanced a Sh600 million loan “to finance farm development to increase acreage under its export crop farming” on the two land parcels that it used to carry out the agriculture business.
The former chairman of Sportpesa Company –a multibillion-shilling betting outfit – used titles of the two land parcels plus another one still in Narumoru and assets of Simba Fresh Produce Ltd to secure the loan. Mr Ndung’u was also touted to be head of campaign fundraising for former President Uhuru Kenyatta’s Jubilee Party in the 2017 elections.
The three land parcels measuring about 600 acres are valued at Sh1.7 billion in total and are under drip irrigation and cultivation of fresh vegetables and herbs.
Also provided as security was the title for his other prime 2.8-acre land parcel in Gigiri, Nairobi, whose value is alleged by the bank to be Sh550 million.
He was optimistic that the business of the family-owned premium grower of herbs, vegetables, and fruits would expand and repay the loan without breaking any sweat.
Mr Ndung’u and his other company known as Homes and Commercial Holdings Limited signed as guarantors of the loan - personal and corporate guarantees and indemnities.
One year later Covid-19 pandemic came calling and his anticipated much-heralded success suffered some shocks as the export business was disrupted globally.
Measures that were taken by governments to prevent the spread of the pandemic were bad for Mr Ndung’u’s business and he is yet to recover.
Simba Fresh Produce Ltd was badly hit that it is still reeling from the effects of the pandemic and could not keep up to date with the loan repayment obligations, prompting the bank to exercise its power of sale by auctioning Mr Ndung’u’s assets.
Before the impending auction, the company had approached the bank for negotiations. The two parties engaged in discussions that led to a loan moratorium period of 12 months and restructuring on May 30, 2021, though it was still unable to pay.
Attempts to engage in further restructuring and concessions were not successful.
Talks with the financial lender were also not successful and the bank initiated the auction process last month. Also rejected was his proposal to settle the debt through the sale of other properties.
It had also been claimed that an amount of Sh99 million would easily be paid off from Simba’s business with the onset of the rains and improving economic conditions.
The bank, however, claimed that Simba did not make any efforts to clear its arrears or present a reasonable proposal for settlement.
As of March 13, 2023, the restructured loan had an outstanding balance of Sh664,815,052.
Attempts to stop the planned sale hit a dead end last week after High Court judge David Majanja threw out Simba’s request to halt the disposal of the properties, effectively making Mr Ndung’u the latest billionaire to face an auction over bank debt.
The judge also threw out claims that the suit properties had been undervalued by the bank.
“I hold that Simba, Mr Ndung’u, and Homes and Commercial Holdings Limited have admitted indebtedness of a not insubstantial amount which continues to accrue interest. If the injunction is granted, the debt may continue to balloon to the extent that it eats into the value of the security. Without valuable security, the bank may be unable to recover the debt,” said the judge.
The judge ruled that Mr Ndung’u and his companies were indebted to the bank. He said that since the requisite notices had been properly issued and served upon the businessman and his companies, the bank’s statutory power has arisen and has now crystallised.
“There is no valid reason why the impending advertisement, sale, and auction of the suit properties should not proceed as planned,” said Justice Majanja.
On undervaluation of the suit properties, Mr Ndung’u stated that the lender had given the Narumoru an open market value of Sh1.72 billion and a forced sale value of Sh1.28 billion yet the alleged outstanding sum owed to the bank by Simba was Sh700 million.
But the judge said Mr Ndung’u, Simba, and Homes and Commercial Holdings Limited did not produce any contrary evidence as to what ought to be the purported ‘true and real’ value of those properties.
“It should not be lost that a valuation report is based on the professional and expert opinion of a duly qualified valuer who assessed the value of properties based on accepted parameters. In order to displace a professional valuation, the plaintiffs must produce clear evidence that the valuation is wrong or at least doubtful,” said the judge.
“I thus find that the plaintiffs’ assertions are mere and bare and do not elevate their case to a prima facie case with a probability of success. This ground by the plaintiffs also fails,” he added.
He found that the businessman and the companies failed to demonstrate a case with a probability of success and the inquiry on whether they are entitled to an injunction came to a halt.
In opposing the planned auction, Mr Ndung’u and the two companies emphasised the value and uniqueness of the suit properties by stating that the suit properties were substantial in value and unique in location, size, character, and utility.
They also highlighted the effect the sale of the Narumoru property would have on Simba’s business and urged that they will suffer irreparable loss which cannot be compensated.
The court heard that Mr Ndung’u has developed the Narumoru properties intensively for farming of fresh produce which is exported to Europe earning the Country and Simba substantial foreign exchange.
Further, that the suit properties have sweeping uninterrupted views of Mount Kenya with all its geographical significance and are only a few kilometres from Nanyuki Town.
Simba stated that it employs 350 people on the property whose lives and livelihoods would be interrupted and disrupted if the intended sale proceeded.
Regarding the Gigiri land, the court heard that “the property is 2.8 acres fronting Limuru Road adjacent to foreign government missions, in a quiet and beautiful environment fronting the beautiful, historically significant and serene Karura Forest and that this size of the property of such character is otherwise unavailable in the area”.
An earlier notice by the bank-appointed Garam Investments Auctioneers indicated that the Gigiri land is developed with a four-bedroom double-storey house (currently being used as an office), single-storey servant’s quarter block, external kitchen, and carport.”
They said the market value of Sh550 million placed by the bank in February 2023 was an undervaluation given its unique features.
But the court ruled that it must, however, be recalled that despite the unique nature of the suit properties, Mr Ndung’u together with Homes and Commercial Holdings Limited still offered them up as securities of the loan.
“They understood that once default took place, the charged properties became commodities for sale available for purchase by all and sundry unless redeemed. In addition, they have not demonstrated that in the event the suit properties are sold and they succeed at the trial, the bank would not be in a position to compensate them,” stated Justice Majanja. BY DAILY NATION
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