SportPesa billionaire loses court bid to stop Sh664m auction

Paul Wanderi Ndung’u. FILE PHOTO | NMG

Billionaire Paul Wanderi Ndung’u has lost a case in which he sought to stop the auction of his properties over a Sh664.8 million loan owed to Equity Bank Kenya, paving the way for the lender to liquidate the assets that were used as collateral.

The businessman had rushed to the High Court after Garam Investments Auctioneers on February 28 invited interested buyers to bid for his prime residential property sitting on 2.8 acres in Nairobi’s Gigiri and a 600-acre commercial farm in Laikipia County.

The original debt was Sh600 million but had grown to Sh664.8 million as of March 13, with the bank instructing the auctioneer to sell the assets after the parties failed to reach an agreement.

Equity told the court that Mr Ndung’u was given a 12-month interest and principal repayment holiday starting May 18, 2020, but later defaulted when the debt service became due.

Mr Ndung’u asked the court to stop the auction, arguing that the properties are unique and far more valuable than the loan balance. 

The court, however, ruled that the bank should proceed with the sale of the assets since they were used to secure the debt.

Read: Paul Ndung’u removed from SportPesa boards

“The final condition concerns the balance of convenience; I hold that the plaintiffs have admitted indebtedness of a not insubstantial amount which continues to accrue interest,” Justice David Majanja said in a judgment issued on April 20.

“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.”

In dismissing the application, the judge added that the undisclosed amounts that had been deposited in court shall be released to the defendant [Equity Bank] and credited to the account of the plaintiffs –Mr Ndung’u and his firms Simba Fresh Produce Limited and Homes and Commercial Holdings Limited.

The businessman took Sh600 million in September 2019 to finance farm development to increase acreage under its export business.

The auctioneer said the farm, comprising three pieces of land, is currently under cultivation of fresh vegetables, sorghum and fodder grass.

The loan was secured by all asset debenture as well as corporate and personal guarantees by Mr Ndung’u, effectively committing the farm plots and the Gigiri property as collateral.

The businessman argued that the auction process was irregular, adding that the bank undervalued the properties and that their sale will result in the loss of jobs. The farm employs 350 people, the court was told.

“That the … property in Gigiri, Nairobi 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,” the plaintiffs said.

“The plaintiffs consider the market value of Sh550 million placed by the bank in February 2023 is an undervaluation given its unique features.”

The plaintiffs added that the bank has assigned a market value of Sh1.72 billion and a forced sale value of Sh1.28 billion on the farm, which they described as having sweeping uninterrupted views of Mount Kenya.

“The plaintiffs have emphasised the value and uniqueness of the suit properties and the effect the sale of the suit property would have on Simba Fresh’s business and have urged that they will suffer irreparable loss which cannot be compensated,” the judge said.

“It must, however, be recalled that despite the unique nature of the suit properties, [Mr Ndung’u and Homes and Commercial Holdings] still offered them up as securities. They understood that once default took place, the charged properties became commodities for sale available for purchase by all and sundry unless redeemed by the plaintiffs.”

Mr Ndung’u is a serial entrepreneur who has launched and folded multiple businesses over the past two decades.

He earned hundreds of millions of shillings in dividends at SportPesa in the years when the brand was owned by Pevans East Africa.

Read: Ndungú’s stake in Sportpesa firm risks seizure without pay

He also earned hundreds of millions of shillings when motor dealer CMC Holdings was acquired by Al Futtaim in early 2014.

Mr Ndung’u also made a fortune at Mobicom, a major dealer of Safaricom in the early years.

He becomes the latest billionaire to face an auction of his properties over bank debt.

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