The White Rhino Hotel in Nyeri County will be auctioned at the end of the month after a Nyeri court lifted an order suspending the exercise.
According to an advertisement in newspapers, the property will be auctioned on November 30.
The hotel, which is over a century old, is managed by Cedar Wood Hotels and Resorts Investment Company.
Interested buyers are required to deposit Sh10 million to bid for it.
Nyeri High Court judge Florence Muchemi dismissed an application by the hotel management which had sought an order stopping the auction by KCB Bank and Garam Investments Auctioneers.
According to court documents, the management had a loan of Sh295 million in November 2013 and an additional Sh175 million was advanced to them in April 2015.
In August 2017, the owners and the lender agreed to convert the overdraft facility into a one-term loan totaling Sh520,665,987.
Due to the coronavirus pandemic, the hotel closed down from February to September 2020.
Thus, the management failed to meet loan repayment schedule and efforts to turn the hotel into a hospital failed.
The management then asked the lender to allow an equity investor to pay off the loan but this was declined.
As the management was seeking to negotiate with the bank for more time to look for a strategic partner, the bank instructed the auctioneers to put it up for auction.
The management argued that the property had been undervalued as the bank had relied on the valuation report dated of August 2021.
“The applicant avers that pursuant to the valuation carried out in 2019, the market value was Sh1.2 billion or a forced sale value of Sh975 million,” the management said.
In its response, the bank said it had issued all the requisite notices and thus it is entitled to exercise its statutory power of sale.
Difference in valuation
“As of May 31, 2022, the total outstanding debt owed by the applicant was Sh670 million which continues to accrue interest,” the bank said in documents filed before the court.
The lender also stated that the difference in valuation was due to the dip in the economic value of the property due to the Covid-19 pandemic.
In determining the case, Justice Muchemi said it is not disputed that the applicant took a credit facility from the bank.
“Further, the applicant does not dispute that it is in arrears of the said loan facility and that the respondents issued the requisite notices in the exercise of the statutory power of sale,” she said while dismissing the management's plea.
Based on her observations, the applicant’s contention is that the lender grossly undervalued the suit property.
“Having considered the material placed before me and bearing in mind the principles set out in the cases cited herein, I am of the considered view that the applicant has not met the threshold of granting an injunction. I find no merit in this application,” she said.
The White Rhino was founded in 1910 by Berkely Cole, Lord Cranworth and Sandy Herd.
They named the hotel after a rhino which was shot in the area during one of the numerous game hunts conducted by White settlers.
In 1965, the hotel was sold to an Asian businessman when it had only 27 rooms, most of which were not self-contained at the time.
In 1970, the hotel was sold again. It was gazetted as a National Heritage site on March 9, 2001.