In the recently disclosed data of May 2023 by CBK, the proportion of Non-Performing Loans (NPLs) to the total loans in Kenyan banks is observed to be approximately 15%. In response to this growing issue of bad loans, banks have found themselves necessitated to place various companies under receivership. One notable example is KCB Bank, the largest commercial bank in Kenya based on total assets, which has taken this step in collaboration with Pinebridge Beach Hotel.

This decision arises in the context of the previous placement of English Point Marina under administration by KCB Bank due to a debt of Sh5.2 billion. However, this action has not been without controversy and criticism. Recently, KCB Bank has appointed Kamal Anatroy Bhatt as the receiver manager for Pinewood Beach Resort and Spa, located in Diani, and owned by the Kanji family.

Pinewood Beach Resort and Spa served as collateral for a loan intended for the construction of the fully serviced five-star English Point Marina. KCB Bank, which had been grappling with NPLs higher than the industry average, obtained permission from the Court of Appeal in October of the prior year to assume control of the mixed-use development.

In a formal deed of appointment of a receiver, KCB stated, “The lender has provided various facilities to the company and/or borrower, supported by several securities in favor of the lender, including liens on various parcels of land registered under the name of Pearl Beach Hotels Limited. The company and/or borrower have defaulted on their payment obligations to the lender as per the terms of the debenture.”

The court sanctioned KCB’s authority to liquidate English Point Marina. Should the proceeds from the sale of assets be inadequate to cover the entire debt, KCB is empowered to seize assets owned by the directors. In the preceding year, KCB had already taken possession of English Point Marina and placed Pearl Beach Hotels, the real estate entity that owns it, under statutory management.

The loan extended to Pearl Beach Hotel was distributed between 2010 and 2016. Despite being designated as part of Kenya’s long-term development blueprint, Vision 2030, English Point Marina, which encompasses 96 upscale apartments for sale, encountered financial difficulties upon completion in 2017. Pearl Beach Hotels struggled to meet the loan repayment obligations to KCB Bank, even with multiple restructuring agreements, moratoriums, and accommodations.

The directors of Pearl Beach Hotel, including Amyn Kanji, Leila Kanji, Alnoor Kanji, Nafisa Kanji, and Nazir Jinnah, were not exempt from this situation. The bank accuses them of financial impropriety, alleging that they established an account at Diamond Trust Bank to divert proceeds from apartment sales away from repaying the substantial Sh5.2 billion loan they owed.

Conversely, the directors have leveled accusations against KCB, asserting that the bank overcharged them by an excessive Sh893 million in relation to the loans granted to their firm. They have indicated their attempts to engage with the lender in order to address the loan repayment situation. KCB, on the other hand, carried out a thorough forensic audit of apartment buyers. Individuals who had settled their dues were granted ownership, while those who had yet to finalize payments would continue processing the remainder through the bank.

August 6, 2023
Delino Gayweh
Serrari Financial Analyst

photo source Google