KDIC takes over firm linked to former Dubai Bank boss

Money Markets

Dubai Bank principal shareholder Hassan Zubeidi. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• The agency said it placed Kemu Salt Packers and Production under receivership effective Tuesday last week.
• The company, which deals in harvest and production of salt in Malindi, is among entities associated with Mr Zubeidi and which owe a total of Sh1 billion to Dubai Bank.

The Kenya Deposit Insurance Corporation (KDIC) has taken over a company associated with former Dubai Bank chairman Hassan Zubeidi for defaulting on loans provided by the troubled lender which collapsed last year.

The agency, which is mandated to protect the interests of depositors and other creditors, said it placed Kemu Salt Packers and Production under receivership effective Tuesday last week.

“Kemu, associated with the former chairman Hassan Zubeidi, has been placed in receivership with effect from September 6, 2106,” KDIC said in a statement.

“To this end, M/s Ernst & Young have been appointed the receivers and have effectively taken over the management of the company.”

KDIC said the company, which deals in harvest and production of salt in Malindi, is among entities associated with Mr Zubeidi and which owe a total of Sh1 billion to Dubai Bank.

Kemu currently sits on 7,450 acres of land in the coastal region.

Debt recovery

KDIC said it will continue to recover debts owed to Dubai Bank for the benefit of depositors and creditors who were exposed to losses when the lender went in receivership in August last year.

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Cases of theft of customer funds, insider lending, low provisioning for losses, parallel banking and default on facilities such as letters of credit had been documented at the bank in the preceding two years.

Several individuals, local and foreign companies had taken Dubai Bank to court seeking settlement of transactions running into hundreds of millions of shillings.

Despite being chairman, Mr Zubeidi was actively involved in the management of the bank where he had an office.

The lender’s malpractices came to a head a month before its closure when it started breaching the daily cash reserve ratio, which is set at three per cent of deposits.

Deterioration in this key metric means the lender’s ability to meet its short-term obligations had weakened substantially.