The East African Development Bank (EADB) is targeting the children of Jubilee Secretary-General Raphael Tuju for recovery of a Sh1.6 billion loan on grounds that they had guaranteed their father when he inked the botched financing deal.
The bank has sent a demand notice to the Cabinet Secretary’s children Mano Tuju, Alma Tuju and Yma Tuju– demanding payment of $16.5 million (Sh1.6 billion) with interest, failure to which the lender threatened to file a bankruptcy suit against them.
“You shall pay EADB…as payment of the principal and interest payable as at 20th December pursuant to a guarantee and indemnity dates 10th April 2015,” noted a demand notice send to Mano Tuju and attached in court documents.
“Further take notice that failure to the pay the afore-stated amount shall result in EADB filing for bankruptcy against your estate.”
The bank has the Kenya’s court backing to enforce a UK judgment to seize Mr Tuju’s property under Dari Limited for sale, a double blow for the Cabinet minister who is currently at a London hospital after he was injured in a road accident while on his way to Kabarak to attend the February 12 burial of former President Daniel arap Moi.
The loans were meant for the construction of Sh100 million two storey, flat-roofed bungalows sitting on a 20-acre forested land dubbed Entim Sidai and the purchase of a 94-year-old bungalow built by a Scottish missionary, Dr Albert Patterson, which currently operates as a high-end restaurant.
But development of the 12 luxury homes worth Sh1.2 billion has fallen behind schedule, setting the stage for defaults and asset seizures.
Mr Tuju and his children guaranteed the multi-million shilling loan, allowing EADB to suck them into the suit where it is seeking to take over the 20-acre prime property in Karen and the high-end hotel operated by the Tujus.
In a petition pending before the High Court, Mr Tuju’s children have come out fighting and accused the bank of being unjust to them.
Yma, Mano and Alma said that the principal debtor, Dari Ltd, was able to and had reasonable prospects of repaying the debt.
Mano reckons that the guarantee does not create a primary obligation, but rather a secondary obligation that makes the guarantee dependent on the principal debtor’s obligation.
The Tujus said the demand notice is incompetent and does not disclose the fact that the EADB holds security against the Sh1.6 billion loan.
They further disclosed that a valuation conducted on the property in 2015 indicated it had a combined market value of Sh1.84 billion, which is in excess of the amount being demanded.
“The failure on the part of the creditor to comply with the law and to acknowledge the full extent of the securities held is selective disinformation and is willfully designed to mislead the court and ultimately to rob the debtor of their constitutional right to property,” Mano added.
On its part, EADB said the guarantee is not disputed and the liability from the defaulted loan had already crystalised.
The bank further said they do not hold any security over the assets of Dari ltd, the principal debtor.
The latest row comes as MPs prepare to review a Bill that seeks to compel creditors to seize assets of defaulting borrowers before touching a guarantor’s property after President Uhuru Kenyatta refused to assent to it. It will require a two-thirds majority or 233 Members of Parliament to be present and voting to veto Mr Kenyatta’s rejection of the Bill.
Mr Kenyatta had argued that the Bill would prejudice the financial sector if enacted into law in its current form.
The Tujus have blamed EADB for the delayed construction of the Karen homes after the lender declined to provide additional millions for building the luxury houses in breach of the loan agreement.
Mr Tuju accused EADB of disbursing Sh932.7 million instead of the agreed Sh943.9 million, adding that the bank had reneged on the plan to offer Sh294 million for building the luxury homes for sale.
“EADB is fully aware that in the absence of the development of the housing units for sale as envisaged in the project proposal, Dari would not be able to service the loan facility,” he added.
He also accuses EADB of stopping KCB Group from taking over the loan and derailing equity investments in the deal by Dubai investors.
The London court dismissed Dari Limited’s opposition to the bank’s claim, setting the stage for the lender to seek enforcement and auction.
The court’s documents showed that the restaurant had entered into an agreement with the bank on April 10, 2015, under which it agreed to give Dari a $9.3 million (Sh943.9 million) loan.
The deal gave the restaurant a 24-month grace period, which fell due in 2017.
But two years later, Dari had failed to pay $1.8 million (Sh186 million) in interest owed, according to the bank, adding that Mr Tuju had ignored a notice to clear the debt. Mr Tuju, who made his wealth from the media business, has invested heavily in real estate.