KCB Group has accused directors of troubled English Point Marina of diverting funds earned from the sale of apartments at the luxurious hotel instead of offsetting the Sh5.2 billion loan they had accumulated.
The lender has stated in court documents that the directors of Peal Beach Hotel, which owns the hotel on the Kenyan coast, have been moving the funds from several accounts in breach of the agreement signed between them.
The High Court has already frozen the accounts, pending the determination of a petition filed by KCB.
The lender is also seeking to suspend an order barring its appointed receiver, Kamal Anantroy Bhatt, from taking over the property in a case that was heard on Monday.
“The bank is also aware that following the appointment of the receiver on 31st May 2022, the directors of Pearl Beach Hotel attempted to access the said funds held at DTB with a view to placing them beyond the reach of the receiver to the detriment of the bank,” KCB’s head of credit Oscar Obuna said.
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Mr Obuna added that DTB confirmed that it would allow the directors of Pearl Beach Hotels to access the funds in the absence of a court order.
“In view of the foregoing, there is a real and imminent risk that unless the injunction and status quo orders are vacated as a matter of urgency, the bank will suffer irreparable harm and damage,” KCB’s lawyer George Oraro submitted.
Court documents filed by KCB show that Pearl Beach Hotel borrowed a total of Sh5.2 billion between 2010 to 2016 for the construction of a fully serviced 5-Star English Point Marina.
The loans were advanced in the form of a development finance facility, which would be sold to offset the debt.
The hotel was completed in 2017 and according to KCB, the developer was unable to service the loan but the lender accommodated the company on numerous occasions.
Mr Oraro said despite numerous restructuring agreements, moratoriums and other accommodations provided to Pearl Beach Hotel, the owners continued to default on the loan.
He noted that the arrears stood at Sh1.7 billion as of May 31, when the lender appointed Mr Bhatt to run the hotel and recover the entire amount including the principal amount and interest, which the bank says stands at Sh5.8 billion.
Mr Oraro said that in a letter to the bank on May 27, Pearl Beach Hotel allegedly confirmed through its director Nazir Jinnah that it was owed Sh3.1 billion and requested to be allowed to pay the money in monthly instalments of Sh4.5 million.
The directors on their part accuse KCB of overcharging them by more than Sh893 million on loans advanced to the firm. They say the firm has been engaging the lender to address the loan repayment.
Mr Jinnah says that the firm has paid Sh3.35 billion.