Armstrong Limited, the appointed bailiffs, will auction the 23-floor Pearl of Africa Hotel, which has 296 rooms, 37 suites, two restaurants, three bars, nine meeting rooms, a 15th floor with executive lounges, and a business centre on behalf of the lender and law firm’s M/S MMAKS Advocates and ENSafrica.
Aya Investments Ltd has less than a month to pay “the entire outstanding decretal sum (including interest),” the fees, and costs of the auctioneer, or their property will be auctioned to the highest bidder.
A source close to the lenders reveal that the South African lender is unlikely to recover all the money it is owed from auctioning the Pearl of Africa Hotel, but will try to recover the highest possible sum from the auction.
“They cannot get that money for the property in this economy. The creditor will likely recover what is possible,” the source said.
Officials from Armstrong Limited declined to comment on the auction, citing confidentiality and insisting that any privileged information on the sale would hurt the interests of their client.
Backstory
Aya started defaulting on the loan when it owed approximately $118.8m (Shs460.9b), inclusive of interest.
Instead of Aya settling the outstanding amount, the company opted for litigation, initiating various court cases, all of which the company lost.
From August 13, 2007, to April 21, 2017, Aya Investments (U) Limited and the Industrial Development Corporation of South Africa engaged in multiple Financial Credit Agreements. The agreements were aimed at funding the development of the “Pearl of Africa Hotel” situated on Nakasero Hill in Kampala.
The aggregate principal amount disbursed across 20 instances under six Financial Credit Agreements totalled $81,765,318 (Shs317.2b).
A rift developed between Aya Investments and the South African lender due to the former’s consistent failure to adhere to the terms of the Financial Credit Agreements. Consequently, on September 13, 2017, the lender issued a notice to Aya, demanding repayment of the outstanding loan amount, which totalled Shs460.9b at that time.
Auction or arbitration
Following this, on September 14, 2017, the South African lender issued a “Notice of Default” to Aya’s South African legal representatives, Schindlers, through the lender’s advocates, ENS Advocates, based in Uganda. This action marked the commencement of the lender’s efforts to recover its assets from Aya.
Aya’s legal representatives, Schindlers, insisted on resolving the dispute through arbitration. On September 29, 2017, Aya took legal action, seeking interim protection from the Commercial Division of the High Court while awaiting arbitration in South Africa. Aya requested the court to prevent the lender from advertising the hotel for sale until the South Africa arbitration concluded.
The South African lender argued that there was no need for arbitration as it was merely exercising its rights under the security instruments, having already issued a notice of default demanding full payment.
The court sided with Aya on October 10, 2017, granting a temporary injunction, later extended. On February 9, 2018, the court referred the dispute to arbitration in South Africa, emphasising the need for swift action.
Despite court orders, the lender continued actions against Aya’s assets, leading Aya to file a lawsuit on November 22, 2017, citing contempt of court and other grievances. However, the ruling, delivered on February 9, 2018, found the requested measures outdated.
High Court ruling
On January 31, 2019, the lender initiated arbitration proceedings in South Africa. Aya objected, citing contempt of court and refused to participate.
The lender, in turn, sought a court order to suspend Aya’s lawsuit until the South Africa arbitration concluded.
The Arbitral Award favoured the South African lender, granting them $153m, which included the principal sum and accrued interest on a loan extended to Aya Investments.
Aya contested the arbitration process but was unsuccessful, leading to the enforcement of the award by the Ugandan High Court.
Subsequently, the lender sought to recover the awarded amount through the sale of Aya’s assets, including the Pearl of Africa Hotel.
