Steel Rolling Mills assets to be sold over Shs50b loan
The Steel Rolling Mills factory in Jinja. The steel manufacturer faces closure for failing to pay back a bank loan. Photo by Denis Edema
What you need to know:
Purpose. The manufacturer acquired the loan in 2014 to purchase machinery and other equipment.
Kampala. Steel Rolling Mills is facing closure and loss of its machinery to Standard Chartered Bank as the bank moves to recover its loan amounting to more than 51.2 billion.
This follows a decision by the Commercial Court not to issue an interim injunction that had been sought by the steel manufacturer that would temporarily stop Stanchart from going ahead to close the business of the largest steel manufacturer in the country until the main suit is determined. The steel manufacturing firm had also unsuccessfully asked the court to stop the bank from putting its business under receivership.
The properties that are on the verge of being sold off include LVR 1618 folio 17 plot Bidco Road, Masese Jinja, LRV 33897 Folio 6 plot 92A fifth Street, Industrial Area Kampala, Block 449 plots 3 to Busiro County and LRV 4238 Folio 1 Plot 106-108 Industrial Estate Road.
“In the premises, I agree with the respondent’s submissions (Standard Chartered Bank) that the applicant’s (Steel Rolling Mills) application does not disclose a prema facie case or disclose serious questions that would merit judicial consideration in the main suit..” ruled Justice Christopher Madrama Izama in his April 15 verdict. Justice Madrama added: “In the premises, the applicant’s application lacks merit and is dismissed with costs.”
Steel Rolling Mills had jointly sought for temporary relief alongside Nyumba Ya Chuma and Scrap Processors.
Mr Bruce Musinguzi, a lawyer from Kampala Associated Advocates, who successfully argued the case against Steel Rolling Mills, yesterday welcomed the decision of the court before saying they are yet to sell off the property and recover the loans in question.
On January 23, 2014 and December 29, 2014, the bank offered Steel Rolling Mills two amalgamated loan facilities amounting to about Shs18 billion and $10 million respectively.
The loans in question were to finance the purchase of machinery and equipment for the Sponge Iron Plant to be fixed into the company’s factory.
According to the court records that Daily Monitor has seen, the two loan facilities were to subsist for the periods of up to 96 months so as to enable Steel Rolling Mills generate funds from the operation of the factory in order to repay the money.
Loan payment
As a way of paying back the loan, Steel Rolling Mills on May 26, 2015 and June 30, 2015 made part payment to the bank of over Shs2 billion and over $7 million.
However, the respondent (the bank) issued a notice recalling the entire outstanding loan in the amount of over Shs18 billion and over $10 million claiming that the debenture is immediately enforced in total contravention of the Mortgaged Act.
Court records further indicate that Nyumba Ya Chuma and Scrap Processors, who are the owners of some of the mortgaged properties, were not notified by the bank about the sudden recall of the entire outstanding loan.
Steel Rolling Mills, through its lawyers of Muwema & Co Advocates, had argued that it was premature and unreasonable and defeats the intention of the parties for the bank to recall the total outstanding loan within 45 days and yet the initial loan period of 96 months had not expired.
The advocates had also argued that the balance of convenience favoured their clients because the bank could recover the said loan after the termination of the main suit, hence the need to issue a temporary injunction that the court rejected.
