I&M entangled in Sh812m property row

The ban on plastic bags has sparked a row between I & M Bank and a Nairobi-based firm over the auction of properties and interest rates on a Sh300 million loan.

Hi-Plast Limited has accused I & M Bank of inflating interest payment to Sh53 million after pricing its loan above the legal cap of four percentage points above the central bank rate that currently stands at nine percent.

The firm also accuses the lender of seeking to auction its properties cheaply based on valuations done three years ago to recover the outstanding loan of Sh373 million.

Hi-Plast told the court Monday that that the properties targeted for sale, including its Industrial Area bags factory and Westland properties, are currently worth Sh812 million.

“The petitioner avers that the Property L.R No. 209/8611/2 situated along Runyenjes Road, Industrial Area is able to settle all its liabilities if disposed of at the current market value as contrary to the outdated value proposed by the secured creditor,” Hi-Plast lawyer Eddy Orinda said, adding the Industrial Area plant is worth Sh732 million.

“That it has come to the knowledge of the petitioner that the secured creditor has illegally, fraudulently and negligently been overcharging interest on the charge account with an aim of clogging the petitioner’s equity of redemption.”

Hi-Plast ran into financial trouble after the government banned the use, manufacture and importation of plastic bags for household and commercial packaging in Kenya from August 28, 2017.
It borrowed Sh300 million from the bank in 2015.

The firm reckons the ban has caused it losses, having invested heavily in machinery and raw materials as well as defaulted on loan repayments, prompting it to sue the State for a Sh2 billion compensation.

Hi-Plast wants the assets sales stopped, and the bank barred from charging interest on the accounts pending conclusion of the interest rate dispute and appointment of the administrator for the business.