Debt investors who held commercial papers with collapsed Kenyan retailer Nakumatt Holdings have had their claim for more than Ksh508 million ($4.1 million) in compensation from Mayfair Insurance Company rejected by a tribunal.
Nakumatt Holdings, a retail chain led by Kenyan tycoon Atul Shah, started facing serious financial difficulties in 2016, leading to the appointment of an administrator to try to stabilize the company.
Despite these efforts, it struggled to pay rent and wages, leading to the closure of 60 stores in October 2017. The retail chain was eventually forced to sell its remaining six branches to Naivas Supermarkets in December 2019, after creditors voted to liquidate the company on Jan. 7, 2020, marking the end of the Nakumatt brand.
Since then, investors who held commercial papers in the company before it was liquidated and sold to Naivas have sought after their funds after Nakumatt’s collapse left them out of pocket. The investors, who include Bimal Shah, a leading Kenyan tycoon, and Broadway Bakery’s managing director, claimed that they took out an insurance policy on behalf of various investors in connection with advances to Nakumatt Holdings in May 2017.
According to Elijah Mwangi, the lawyer who represented the investors at Mayfair had guaranteed payment to the noteholders of up to 80 percent of the invested amount in the event of default by Nakumatt.
In reaction, a tribunal, comprising Njoroge Regeru, Aaron Ringera, and John Ohaga, ruled that there was no valid policy in place between the investors and Mayfair, as there was no evidence that the premium had been paid.
Mwangi said the investors were entitled to full compensation plus interest from February 2018, as the policy was both an indemnity policy and a guarantee, and accused Mayfair of failing to honor their claim promptly and attempting to divert liability.
Mayfair, however, denied having issued a comprehensive insurance policy and argued that any such policy, if it had been issued, was for the note trustee rather than the individual claimants.
Prior to the woes of the retail chain, Shah, a leading Kenyan tycoon who ranks as one of the key players in the country’s retail industry valued shareholder equity in the retail chain at $400 million.
His stake in Nakumatt Holdings, the parent company of Nakumatt Supermarkets, at the time made him one of Kenya’s richest businessmen and one of the leading players in the East African retail industry.
