The management of Cytonn Investments has moved to cover itself from the wrath of investors by voluntarily placing two of its insolvent real estate funds under administration.
The company’s Chief Executive Officer Edwin Dande initiated the process which will see the controversial Cytonn High Yield Solution (CYHS) fund and Cytonn Project Notes (CPN) placed under the watch of a court appointed administrator.
Subsequently, the High Court Commercial and Tax Division has appointed Kerato Marima, a licensed insolvent practitioner as the administrator of the property of Cytonn High Yeilds Solutions LLP ahead of further court directions to be issued on November 24.
Cytonn is expected to serve all its creditors covered in the two insolvent real-estate funds with the new order ahead of the mention next month.
What it means
By putting the insolvent funds under administration, Cytonn is set to keep its aggrieved creditors off its back preventing scenarios such as auctions and attachments to its assets with the current insolvency law allowing companies to remain a going concern while in operations.
Effectively, the administration process serves as a moratorium which blocks any of Cytonn’s aggrieved creditors from applying to wind up the company.
The court appointed administrator will meanwhile attempt to rescue investments in the two funds and assure the best outcome to aggrieved investors.
“First administration provides an enabling environment for restructuring under a competent administrator. Second, it gives a moratorium of any ongoing collection efforts so that all investors get to be treated equally,” said Cytonn Group CEO Edwin Dande.
Curiously, the voluntary administration is seemingly a counter reaction to a planned class suit by aggrieved investors which has been in the works since June this year.
With the two funds in administration, the aggrieved investors can no longer push to wind up the company as it now bears protection in the law.
Cytonn has been unable to meet repayments to investors in the two funds whose value is presently estimated at Ksh.12.5 billion.
The company has nevertheless offered alternative settlements to investors including an offer of housing units under its complete and ongoing real-estate development projects.
By early September, Cytonn had deployed the option to clear 20 per cent of its obligations to creditors under the CYHS and CPN or an equivalent Kh.2.5 billion.
Cytonn has previously tied the illiquidity of the two funds to the effects of the COVID-19 pandemic on real estate even as the Capital Markets Authority (CMA) probes the two funds for potential mismanagement and malpractice.
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